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Understanding the Social Security Widow Benefit

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A simplified version of the widow calculation says that the surviving spouse receives the higher of his or her own benefit or the benefit of the deceased, which may have been reduced or increased depending on if and when the deceased filed for Social Security benefits.

There are several layers of complexity to the widow(er) benefit that make it difficult to determine whether to claim widow(er) benefits early, when to wait and when to switch to the survivor’s own benefit. There are actuarial reductions for the widow who claims early and a widow limit.

The good news is Nationwide’s Social Security 360 AnalyzerSM includes a widow calculation, so you can run scenarios for your widowed clients and help them determine when to claim benefits.

Widow Options

Deceased filed for Social Security retirement benefits

Filed prior to full retirement age: maximum widow benefit equals the larger of the deceased reduced benefit or 82.5% of deceased primary insurance amount

Filed after full retirement age: maximum widow benefit equals the deceased benefit including delayed retirement credits

Deceased did not file for benefits

Died prior to full retirement age: maximum widow benefit equals the primary insurance amount of the deceased

Died after full retirement age: maximum widow benefit equals the deceased benefit as if deceased elected on date of death, including delayed retirement credits

There will most likely be complications when advising a widowed spouse on when to elect Social Security benefits.

Here are the three main complicating factors for widows:

  • Two different full retirement ages (FRA): retirement FRA and their widow FRA.  For most people getting ready to elect Social Security, their retirement FRA is 66. Their widow FRA is determined by subtracting two years from their date of birth and using that as their birth year. There is no advantage to delaying widow(er) benefits past the widow’s FRA as there are no delayed retirement credits based on the widow’s claim age.
  • Two different full retirement ages (FRA): retirement FRA and their widow FRA. For most people getting ready to elect Social Security, their retirement FRA is 66. Their widow FRA is determined by subtracting two years from their date of birth and using that as their birth year. There is no advantage to delaying widow(er) benefits past the widow’s FRA as there are no delayed retirement credits based on the widow’s claim age.
  • Widow limit: the widow limit caps the widow(er) benefit at the larger of the benefit the deceased would have received if he or she were still alive, or 82.5% of the deceased primary insurance amount. The widow limit only comes into play if the deceased claimed benefits prior to his or her full retirement age.

Here’s an example that takes these complications into account. Let’s say Linda is your client. Her husband Paul passed away when she was 60 and he had a primary insurance amount of $2,000. The widow benefit that Linda could receive is based both on when Paul claimed and when Linda decides to claim that benefit. Here are a variety of scenarios to illustrate how Linda’s widow benefit will be affected.

 

If you receive widow(er) benefits, you may also switch to your own retirement benefits as early as age 62, assuming the amount will be more than you receive on your deceased spouse’s earnings. In many cases, you can begin receiving one benefit at a reduced rate and then switch to the other benefit at the full rate when you reach full retirement age. And you can take a reduced benefit on one record and later switch to a full benefit on the other record. For example, a woman could take a reduced  widow’s benefit at age 60 and then switch to her own retirement benefit when she reaches full retirement age. Or she could continue to get delayed credits on her own record past full retirement age and switch to her own benefit at age 70.

It’s critical to understand that the option for the widow(er) to switch to their own benefits is not  allowed unless the widow(er) restricts the scope of the initial application. The ability to run these calculations with the Social Security 360 Analyzer and find the best possible election strategy is important to your widowed clients. These scenarios could also be enlightening for your married clients to show what electing early can do to survivor benefits.

For more information, visit nationwidefinancial.com/360analyzer.

 

Content developed in partnership with Social Security Timing®. Not endorsed or affiliated with the Social Security Administration or any other government  agency. This is being provided for informational purposes only and should not be construed as investment, tax, or legal advice or a solicitation to buy or sell any specific securities product. The information provided is based on current laws, which are subject to change at any time, and has not been endorsed by any government agency. Nationwide Investment Services Corporation (NISC), member FINRA. Nationwide Retirement Institute is a division of NISC. Social Security 360 Analyzer is a service mark of Nationwide Life Insurance Company. Nationwide, the Nationwide N and Eagle, Nationwide is on your side and Nationwide Retirement Institute are service marks of Nationwide Mutual Insurance Company. © 2015 Nationwide NFM-13670AO (01/15)

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