The Ins and Outs of Claiming Your Survivor Benefit

Why It Might Make Sense to Wait to Collect Your Survivor Benefit

Chances are if you recently lost your spouse and call the Social Security Administration to inquire about your survivor benefit, they’ll say, “You’re eligible now. You should take it now.” But slow down. That might be shortsighted advice, which doesn’t take into consideration your full financial picture. When it comes to Social Security planning there are multiple strategies to consider for maximizing income over the span of your life. In fact, the best advice might be to delay taking your survivor benefit. While there are complexities to developing a strategy unique to your financial situation, always start with this foundational question: If I wait, what will I gain?

Social Security Spousal Benefit: An Insurance Benefit for the Wife

Originally, the Social Security spousal benefit was created as a form of insurance for the wife, either because she didn’t work outside of the home or did not earn as much as her husband throughout the course of her career. At retirement, she was entitled to half of his benefit while he was living, and when he passed away, she was entitled to his full benefit.

Seems simple. But today the scenarios are much more complicated, and both the husband and the wife should carefully plan for spousal and survivor benefits.

Individuals can claim Social Security on their own record as early as 62. It’s a little bit different if you’re a survivor. If your spouse passes away you can take your survivor benefit as early as 60, and if you are disabled you can take it as early as 50. However, taking either of these before your full retirement age (FRA) will cause your actual benefit to be reduced. For those born between 1943-1954, FRA is 66; for those born later this age gradually moves up to age 67.

The amount you receive as a survivor will be equal to your deceased spouse’s original benefit. Women are statistically more likely to be the survivor, so for purposes of our example we will assume the husband died first. If your husband waited until FRA to file for Social Security, you’d be eligible for his full benefit amount as a survivor. If he delayed claiming Social Security, he earned an additional 8% for each year he waited between FRA and age 70, which you would also be entitled to receive. Conversely, if he filed before FRA this ultimately translates into a permanently reduced survivor benefit for you. (If he hadn’t yet claimed Social Security, the survivor benefit would be his FRA amount plus any delayed credits earned up until his date of death.)

Complexities of the Survivor Benefit

As you can see, there are many things that factor into the amount of the survivor benefit. But you must also look at the amount you’d receive based on your own work record. This is because you cannot take both benefits simultaneously.

If you and your husband are over age 70 when he dies, it is as simple as picking the higher of the two. But if you are under age 70 and qualify for survivor benefits and Social Security based on your own work record, then there are some strategies to keep in mind which allow you to switch from one to another. The key is to take the higher benefit last, since this will be the one that you will receive for the rest of your life.

For example, if your own benefit at FRA or later is higher than your survivor benefit at FRA, you could file a restricted application for your survivor benefit at age 60 and switch to your own benefit between FRA and 70. The reverse is also true. If your survivor benefit is the higher of the two, you could take your own reduced benefit at age 62 and then switch to your survivor benefit at FRA. (Survivor benefits don’t grow an extra 8% per year after FRA like your own benefits do.) This gives you a steady income stream while you wait to claim the higher of the two.

If you aren’t eligible for Social Security based on your own work record and you are under FRA, you will want to consider your life expectancy and other income sources before deciding whether to take your survivor benefit at a reduced rate or wait for the full amount at FRA.

Another little-known fact about Social Security survivor benefits is that if a widow or widower remarries after the age of 60, he or she is still eligible for a survivor benefit based on the work record of their deceased former spouse. For this example, let’s once again assume the wife is the survivor. If she remarries at 60 or later, she can collect either 50% of her new husband’s benefit or 100% of her survivor benefit based on her deceased husband’s work record. If later on her new husband dies, she can then pick the higher survivor benefit of the two.

Keep in mind that the earnings test still applies for those under FRA who have applied for benefits. If you are still working, $1 in benefits is withheld for every $2 earned above $17,640. The calculation changes for the year in which full retirement age is attained. In this case, $1 in benefits is withheld for every $3 earned above $46,290 in the months leading up to your birthday. These exempt amounts can change from year to year.

Because each situation is unique, it is important not to rush into a decision about collecting a survivor benefit. Slow down, consult an advisor, and review your entire financial plan. It might make sense to wait to collect—so you can gain in the long run.