Social Security Survivor Benefits

Someone who was married to an individual covered under the Social Security system and is now deceased has a few options not available to living spouses or other people in the Social Security system. They can either claim their retirement benefit, or take a widow benefit. They can even take one and then switch over to the other later. It's critical to be aware of the unique rules surrounding Social Security widow(er) benefits to help your clients avoid costly claiming mistakes.

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Widow(er) Benefit Basics

Individuals who qualify can take a widow(er) benefit as early as age 60. If they claim early, they will receive a 28.5% reduction at age 60. It's pro-rated for each month between age 60 and the month they reach their widow(er) full retirement age. It's important to note that the widow(er) full retirement age can differ from the full retirement age for their retirement benefit. They can claim their own Social Security retirement benefit as early as age 62. If they claim survivor benefits early, they are subject to the earnings test, and their benefits will also be reduced based on their full retirement age.

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Claiming Strategies for Survivors

For most widow(er)s, the best strategy is to take one benefit as early as possible then switch to a more significant benefit later. You can either start with retirement benefits and switch to widow(er) benefits or start with widow(er) benefits and switch to retirement benefits. Clients can claim retirement benefits as early as age 62. Still, they should switch over to the widow benefit no later than full retirement age, because widow benefits do not get delayed retirement credits.  On the other hand, if someone starts with a widow benefit because their eventual Social Security benefit on their own work record will be larger, start the widow benefit as soon as possible at age 60. Wait until age 70 to switch over to the retirement benefit.

Earnings Test

One part of this equation that financial advisors often overlook is the earnings test. A client can have up to about $17,000 before they start to experience the earnings test. The earnings test reduces their Social Security benefit by $1 for every $2 they earn over the threshold. That penalty is not dollar for dollar and doesn't start until the client reaches the threshold. So, in many cases, it can make sense for a widow(er) to switch to part-time work and have the remainder of their salary made up by a survivor benefit. You may have clients who can retire to a part-time job, where maybe they're making $30,000 a year and supplement that with a $15,000 widow(er) benefit and some portfolio withdrawals. 

Social Security Timing®

The interplay between Social Security retirement benefits, Social Security widow(er) benefits, and the earnings test can help you create a smart, phased retirement plan for those widowed clients. Learn how Social Security Timing can help you optimize your widowed clients' Social Security claiming strategy. See the exact year and month the client should claim and the month, year, and amount that the client will receive when they pass the earnings test.

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