This week in his Hidden Value column for ThinkAdvisor, Joe Elsasser, CFP®, talks about the complex rules and regulations surrounding the Social Security widow(er) benefit and how advisors can help retirees determine the optimal time to claim.
"The benefit is limited to the higher of 82.5% of the deceased’s full retirement age (FRA) benefit or the amount the deceased was actually receiving at the time of their death. If the deceased was born between 1943 and 1954 and claimed benefits at age 62, and the surviving spouse reached full retirement age by the time of the deceased’s death, the surviving spouse will actually receive more than the deceased was receiving (82.5% of the deceased’s FRA benefit rather than 75%).
As FRA increases from 66 to 67, the effect can be even more significant. For example, if the deceased were born in 1958 and died in 2020 immediately after claiming benefits, they would be receiving 71.67% of their Primary Insurance Amount. The survivor would receive 82.5% of the deceased’s FRA benefit rather than what the deceased was receiving.
As a result, in cases where the older spouse is a significantly lower wage earner and is in poor health, claiming retirement benefits as early as possible often makes sense.
On the other hand, in cases where the survivor is younger than the deceased, and the deceased was the higher wage earner and had elected early benefits, you’ll need to pay special attention to claiming decisions for the survivor, as delaying the widow(er) benefit all the way to the widow(er)’s FRA may result in months of forfeited checks without a corresponding increase in benefits."
Read the ThinkAdvisor article in its entirety.