Social Security Survivor Benefits: Don’t Just Survive, Maximize

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Like many other aspects of the Social Security system, the rules governing Social Security benefits for surviving spouses can be anything but straightforward—it isn’t, as many believe, as simple as continuing to receive a deceased spouse’s benefits. 

Unfortunately, many advisors and clients overlook the Social Security system’s built-in complexities when planning for the death of a spouse, potentially leaving thousands of dollars on the table each year.  Because these extra funds can mean the difference between living in poverty and relative comfort for many clients, advisors must educate clients in advance about the proactive steps that must be taken in order to maximize potential Social Security survivor benefits upon the death of a spouse.

Social Security Survivor Benefits: The Basics

After the death of a spouse, the surviving spouse can begin to claim Social Security survivor benefits as early as age sixty, although the benefit will be reduced based on the number of months remaining until the survivor reaches full retirement age.

Like a traditional spousal benefit that is received when both spouses are alive, the amount of the survivor benefit is based on the deceased spouse’s traditional retirement benefit, meaning that the benefit increases in proportion to how much the spouse earned during working years.

If the surviving spouse reached full retirement age before his or her death, the survivor’s benefit will equal 100 percent of the deceased spouse’s benefit. If the deceased spouse was receiving a reduced benefit, the survivor is only entitled to receive that reduced amount.  However, if the surviving spouse had reached full retirement age at the time of the claim, he or she will be entitled to the higher of the reduced benefit or 82.5 percent of the deceased spouse’s full benefit. 

If a surviving spouse is between ages 50 and 59½ and is disabled, he or she is entitled to receive a reduced benefit (71.5 percent of the deceased spouse’s benefit).

However, additional complexities come into play when a surviving spouse is also entitled to claim his or her own retirement benefit.  If both spouses are already claiming benefits, the higher benefit amount automatically will become the survivor’s benefit.

If the surviving spouse has not yet claimed his or her own benefit, he or she is entitled to receive the survivor’s benefit or his or her own benefit.  For many surviving spouses who have yet to reach full retirement age, it can be beneficial to take the survivor benefit and allow his or her own benefit to grow.  When the surviving spouse reaches age 70, he or she can switch from the survivor benefit to his or her own benefit, and receive an increased benefit.

In determining which benefit to choose (and when), it is important that both the size of the benefits and the client’s life expectancy are taken into account.  A client who has a long remaining life expectancy may choose to take a lower survivor benefit for several years in order to eventually switch to an increased benefit at age 70 (survivor benefits do not increase if claimed later than full retirement age).

Potential Future Complications: Working and Remarriage

Earnings restrictions apply to a surviving spouse that is receiving Social Security survivor benefits in the same manner as they apply to any other recipient.  In 2017, if a client a client is younger than full retirement age, collects Social Security early and earns more than $16,920, his or her Social Security benefit will be reduced by $1 for every $2 that he or she earns over that limit.  When the client reaches full retirement age, the earnings cap increases to $44,880 and the reduction is only $1 for every $3 earned above the limit.

If the surviving spouse remarries before reaching age 60, he or she will no longer be entitled to Social Security survivor benefits based on the prior spouse’s record unless the subsequent marriage ends.  Remarriage that occurs at age 60 or later does not impact the survivor benefit rules.

Further, an ex-spouse who was married to the deceased spouse for at least ten years is entitled to survivor benefits based on his or her former spouse’s earnings record even if the deceased spouse had remarried.

Conclusion

The rules governing Social Security survivor benefits are tricky, but with careful planning and evaluation, advisors can help clients learn the rules and maximize the value of their eventual Social Security survivor benefit.

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Read previous coverage of Social Security planning in Advisor’s Journal. For in-depth analysis of the Social Security rules generally, see Advisor’s Main Library.

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