Social Security Benefits When a Spouse Dies, Part II

The Social Security Timeline and General Rules Affecting Survivor Benefits

In the last post we covered some of the basics of Social Security (SS) including how to access and review a SS benefit statement, common terms, types of benefits and, most importantly, why a new widow should not listen to everyone when they tell her to “go down to the SS office and apply for benefits”.

In today’s post we’ll look at the SS timeline and key ages as they relate to eligibility of retirement, spousal and survivor benefits and how those benefits can change based on when they are started. With most widows wondering what SS benefits they can collect, we’ll try to boil all the SS rules down to a simple flowchart that may help get you headed in the right direction regarding who gets what benefits after a spouse dies. 

Social Security Timeline

The graphic below depicts the standard Social Security (SS) timeline from ages 60 to 70. For retired or nearly-retired couples, this 10-year timeline is where most of the SS decisions are made. For younger widows and those raising children, the timeline expands to include a broader range of younger ages. Each posted age on the timeline below represents a change in eligibility or amounts of various SS benefits. Let’s visit each age on the timeline to understand the impact of reaching that age:

Widow's Social Security Timeline

Age 60 – Is the youngest age a widow (or widower) can collect SS survivor benefits, should their spouse pass away (survivor benefit is also known as the Widow’s Insurance Benefit). If the SS Administration considers the widow disabled, she may collect survivor benefits as early as age 50. At age 60, the widow is not yet eligible for her own retirement SS benefit, just the survivor benefit. Starting the survivor benefit at age 60 will result in a reduced benefit; typically 71.5% of the full survivor’s benefit. However, if the deceased spouse delayed benefits (past their FRA) or started them early (prior to their FRA), there are several complex factors to consider which will be detailed in a future blog post.  Remarriage and/or raising young children can also affect certain survivor benefits.

Age 62 – The earliest age that an eligible person can start their own SS retirement benefit or collect a spousal benefit. Collecting a spousal benefit may require your spouse to already have started or filed for their own SS retirement benefit.

Age 65 – The Full Retirement Age (FRA) for those born prior to 1938. Age 65 is also the age that most people are eligible to start Medicare Parts A and B (disabled individuals may qualify for Medicare prior to age 65). In the last post we discussed the fact that FRA is the point where an individual can collect 100% of their retirement benefit (this 100% amount is known as the Primary Insurance Amount or PIA) if they haven’t already started collecting it earlier.

Age 65 to 67 – For those born in 1938 or later, your FRA will range between ages 65 and 67, in two-month increments. If you were born after 1959 (so 1960 or later), your FRA is age 67. For everyone else (born 1938 through 1959) your FRA is somewhere between ages 65 and 67. Here’s the chart to determine your FRA.  As a widow, your survivor’s FRA might be different than your retirement FRA by up to four months (take a look at the chart half way down the linked page).

Age 70 – This is the latest you can delay your own SS retirement benefit and earn Delayed Retirement Credits. Delaying the start of your own retirement benefit beyond age 70 earns no higher benefit. For the survivor benefit, delaying it beyond your FRA provides no larger benefit. Examples are provided later.

How do SS retirement benefits change if start early or late compared to starting at FRA?
For many of the scenarios in future blog posts, it’s beneficial to understand how SS retirement benefits change when a person decides to start collecting on-time, early or late. The decision your spouse makes to start their SS retirement benefit early (prior to their FRA), on-time (at FRA), or delayed (after FRA and up to age 70), may impact how much in survivor benefits you receive as a widow.

In the timeline below, let’s say a husband was born in 1954, making him 60 in 2014. His wages over the past 35 years have earned him a SS retirement benefit of $2,000 per month if he starts his benefit at his Full Retirement Age, which is 66. This $2,000 is his Primary Insurance Amount (PIA) and is the reference amount used to calculate all other benefits for spouses, survivors, children, early and delayed benefits.

If the husband decides to take his own SS retirement benefit early, at age 62, he receives an amount less than $2,000 per month. Because his FRA is age 66 and he starts his benefit four years early, he would receive 25% less or $1,500 per month. If he starts benefits anywhere between age 62 and 66, the monthly amount would be between the $1,500 and $2,000 per month. Benefit adjustments, for starting early (prior to FRA) or delayed (past FRA) are calculated in monthly intervals, not annual intervals. If the husband starts his retirement benefit 18 months prior to his FRA, his benefit will be reduced by 18 x 5/9% = 10% or $1,800 per month. If he starts 12 months early, the reduction is 12 x 5/9% = 6 2/3% or about $1,867 per month. If he starts 24 months early, the reduction is 24 x 5/9% = 13 1/3% or about $1733 per month. The monthly reduction fraction changes from 5/9% to 5/12% for those months he starts more than 36 months early.  The first 36 months are still reduced by 5/9%. If he starts 48 months early at age 62, his total reduction is 25% (5/9% x 36 + 5/12% x 12 = 20% + 5% = 25%) or $1,500 per month. Aside from potential annual Cost of Living Adjustments (COLA), starting a retirement benefit early results in a permanent reduction over his lifetime.

Let’s say the husband works through his sixties and decides to delay the start of his SS retirement benefit until age 70. Every full 12 months he delays past age 66 earns him an 8% credit (Delayed Retirement Credit [DRC]) on top of his $2,000 per month. Since there are four years between age 66 and 70, the 8% per year credit produces a 32% increase in benefit above the PIA ($2,000/mo). In this case the age 70 benefit is $2,640 per month ($2,000 x 1.32).  DRCs are offered at monthly intervals, not just full year delays. Each month one delays earns them an 8/12% (0.667%) increase in retirement benefit. Each 12 months of delay provides 12 x 8/12% = 8% increase.  

The age 70 retirement benefit of $2,640/month is 76% higher than the age 62 retirement benefit of $1,500/month! That’s significant and needs to be considered when applying for benefits, especially when thinking about survivor benefits for your spouse.

Social Security Timeline, FRA 67

What SS benefits Can I Collect After My Spouse Dies?
Social Security is complicated. Every person has 96 different months they can start collecting their own retirement benefit. The same person might also have spousal or survivor benefits to consider. Their spouse may have had a similar number of options. Combined, Social Security Solutions, Inc reports that a couple could have over 10,000 possible claiming options to consider! One’s search for the optimal SS claiming strategy might get even more complicated if Government pensions, excessive earnings prior to FRA, raising minor children, disability, remarriage, and ex-spouse benefits come into play.

With all those potential claiming options, is there an easy way to answer the question, what SS benefits can I collect after my spouse dies? Not exactly, but you can at least get headed in the right direction by considering a few rules of thumb. Run through the flowchart below to help you get pointed in the right direction*. Realize that a full analysis of your situation is probably required to get the most out of your eligible SS benefits. Discussion of the flowchart’s four possible outcomes is provided further down the post.

 Social Security Widow's Benefit Flowchart

*This flowchart represents a very basic overview of SS claiming rules and does not reflect all the detailed quirks and exceptions of the SS system and your situation. There are many caveats which are not depicted in this simple flowchart. For example, if your ex-spouse dies and you were married to them for at least 10 years and are currently not married, you may qualify for survivor benefits based on their SS earnings record. Another example of exceptions is working credits. The flowchart assumes the deceased spouse earned enough SS working credits to meet SS eligibility requirements. Fully Insured status normally requires 40 working credits (earned at a rate of 4 work credits per year) for retirement benefits but the number of working credits is less for younger workers. Also, there is a special rule that allows the SSA to pay survivor benefits to the deceased’s children, and spouse while she is caring for the deceased’s children, with as little as 6 work credits (see bottom of linked page) if earned in the three years just prior to death. There are many exceptions.

It’s always best to find out your benefit claiming options from your local SS representative and then, before signing up for benefits, get an in-depth SS claiming strategy analysis from a qualified advisor. More SS scenarios and details are forthcoming in future blog posts.

General Flowchart Results and What They Mean to You
The flowchart is based on the recent death of your current spouse (no remarriage). Work your way through the above flowchart to reach one of the four results (panels #4, 5, 6 or 7) and then find the appropriate paragraph below for additional information that might help your understanding. In later blog posts detailed examples representing each of the four flowchart results will be discussed.  

Flowchart panel #4. You may be eligible for survivor benefits if they are higher than your own; analysis is required
In this scenario, you have already started your own SS retirement benefit, or you may be collecting a SS spousal benefit based on your spouse’s SS earnings record, and your spouse was not collecting a benefit at the time of their death. If you are newly widowed and age 60 or older, you may qualify for a survivor benefit (if you haven’t remarried prior to your age 60). Your spouse, in this scenario, may not have collected their own retirement benefit because they were too young to collect, or maybe they decided to delay their own retirement benefit and let it grow (a strategy called File and Suspend, which was eliminated in Nov 2015 for most married couples). This scenario requires determination of available SS retirement and survivor benefits followed by the proper analysis to find the optimal claiming strategy. Future blog posts will cover several scenarios meeting the condition of panel #4.

Flowchart panel #5. Depending on benefit start dates, you may be eligible for a benefit close to the highest eligible benefit; analysis is required. Both spouses have started SS benefits in this situation. One may have started their own retirement benefit and the other a spousal benefit. Or perhaps both are collecting their own retirement benefit. If one or both started benefits early (prior to their own FRA), the early start date(s) could affect the benefits available to the widow. The key is to understand the start date and type of each spouse’s benefit so that an optimal claiming strategy is found for the widow.

Flowchart panel #6. Most likely no SS benefits are currently available but contact the SSA to be sure
If you are under age 60, you most likely are not eligible for SS survivor benefits unless you are disabled or have one or more children that have not yet reached age 16. Your children may be eligible for their own children’s benefit (which is one type of survivor benefit) in certain circumstances. A widow can collect survivor benefits as early as age 60 (age 50 if disabled). Whether it’s wise to collect survivor benefits at age 60 is a discussion left for a future blog post.

Flowchart panel #7. You and/or your children under age 19 may be eligible for SS survivor’s benefits; analysis is required
If you are newly widowed and age 60 or older, you may qualify for a survivor benefit assuming you haven’t remarried prior to your age 60. If you are disabled and at least 50 years of age, you may qualify for a survivor benefit. Lastly, if you are newly widowed and raising the deceased’s children who are unmarried and under age 16, you and each child may each be eligible for SS survivor benefits, up to the Family Maximum. Once the youngest child reaches age 16, the you no longer receive SS survivor benefits as the parent (unless you meet other requirements such as age 50 or 60 criteria discussed earlier in this paragraph). A child’s survivor benefit can continue until they reach age 19 and 2 months (if attending school) or graduate from high school, whichever occurs first.  Children disabled prior to age 22 at the time of their parent’s death may be eligible for their own disability benefit and/or a children’s benefit, which may continue indefinitely.

Lessons Learned:

  • After your spouse dies, you do not collect both his and your benefit. You may end up collecting an amount equal or close to the larger of the two benefits, but you won’t be able to add the two benefits together and collect that amount.
  • Starting SS retirement benefits early versus delaying to age 70 can result in a large (up to 76%) difference in monthly benefits and that difference is permanent.
  • Starting retirement benefits, especially for the higher wage earner, should be based on the life expectancy of the other spouse, not the higher wage earner. This potentially provides the largest survivor benefit to the surviving spouse.
  • A divorced spouse can qualify for survivor benefits should their ex-spouse die. The marriage must have lasted at least 10 years, the surviving ex-spouse must be at least age 60 (unless disabled) and not married.
  • All eligible SS benefits (your own retirement, survivor and even ex-spousal benefits) must be coordinated. We’ll take a closer look at this coordination in the next few blog posts. It’s not as simple as applying for SS benefits immediately after your spouse died just because a family member or friend or coworker told you to go apply for benefits. In most cases, analysis is required.

Next Post: We’ll take the general scenarios discussed in this post and add specifics such as spousal ages (both the same age, one spouse older than the other), benefit amounts (spouses with very different benefit amounts and those with Jim Schwartz, Certified Financial Planner™ Professionalsimilar benefits), and benefit sequences (one or both spouses have or have not started benefits prior to the death). We’ll also take a look at family benefits when young children are involved, how government pensions may affect survivor benefits and what happens to survivor benefits if you are working or go back to work in your early 60s.  

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