A Tough Social Security Question: Delayed Claiming and a Deceased Spouse

What You Need to Know

A reader asks: What happens when a couple plans to delay one benefit until age 70 and one spouse dies early?
If the spouse delaying their benefit dies before 70, the survivor can receive the amount they were eligible for at death.
If the other spouse dies early, the survivor can keep collecting the deceased spouse's benefit and let their own continue to grow.

ThinkAdvisor has been publishing a series of Social Security claiming case studies over the past several months. The material has been drawn from the updated ALM publication “2024 Social Security & Medicare Facts,” by Michael Thomas with support from Jim Blair, a former Social Security administrator, and Marc Kiner, a planning expert with extensive experience in public accounting.

A number of the case studies have prompted readers to offer comments and questions about the nuances of optimal claiming, including the recently featured case of the high-earning spouse.

In the example, the optimal claiming approach proved surprising to some readers. The big takeaway was that when to claim spousal benefits in cases with big differences in earnings histories can make waiting until age 70 a suboptimal strategy. Delaying is going to be better than claiming a significantly reduced benefit at age 62, but the earlier collection of the full benefits will pay off in the end — unless one member of the couple lives a long time.

This and other counterintuitive findings prompted Thomas A. to write in last week with additional questions about the interaction of spousal and survivor benefits, this time in cases with similar earnings histories. The answers to Thomas’ questions, as detailed below, should offer additional food for thought for advisors seeking to help clients avoid claiming mistakes and maximize their Social Security Income.

The Scenario

Thomas proposed the following scenario before posing two fundamental questions: Consider a couple in which the husband was born in 1967 and the wife was born in 1969. The former has a projected worker benefit of $2,237 at age 62, and this increases to $3,178 at the full retirement age of 67 and $3,940 at the maximum claiming age of 70. The wife, in turn, has her own worker benefit projected as $2,008 at 62, increasing to $3,055 at 67 and $3,870 at 70.

As Thomas noted, one strategy available to this couple would be for the husband to draw his early benefit of $2,237 at age 62, while the wife plans to wait for her maximum benefit at age 70. While this approach may not be mathematically optimal depending on the longevity projection assumed, it is still relatively effective from a wealth maximization perspective while also potentially providing income early in the couple’s retirement.

The big question, though, is what happens if the wife dies unexpectedly due to an accident or illness. Specifically, can the husband in this scenario switch to his wife’s benefit of $3,870 when she would have reached 70? And, if the husband dies before the wife turns 70, can she receive his benefit until she is 70 and then switch to her maximum benefit of $3,870?

What the Experts Say

As explained by Blair, the former SSA official, the first question comes up regularly in practice. The answer is mixed. That is, while the husband does benefit from the deceased wife’s delayed claiming, he won’t be able to fully delay claiming her benefit through what would have been her 70th birthday.

He would instead be able to draw an amount equal to what her benefit would have been when she died, Blair explains. So, if the wife was age 69 when she passed, the husband would become entitled to her primary insurance amount plus delayed retirement credits earned up to her month of death.

Deemed Filing and ‘File and Suspend’

In the past, the now-defunct file-and-suspend strategy generally allowed one spouse to begin collecting spousal benefits without jeopardizing the amount of the second spouse’s retirement benefit. The second spouse was permitted to file for benefits and then make a subsequent filing to suspend those benefits.

However, the rules changed in 2015, and for clients born in 1954 or thereafter, the option of choosing between two spouses’ benefits is no longer available. Under current rules, a client will automatically receive the higher of the two benefits when applying for Social Security — referred to as a “deemed filing.” The client will automatically be deemed to apply for both available benefits.

As noted above, surviving spouses (or divorced surviving spouses) are not subject to this rule, and they are still permitted to apply for survivor benefits and subsequently switch to their own retirement benefits at a later date if the retirement benefit would produce a higher total benefit. Deemed filing also does not apply to a client who is receiving a spouse’s benefit and is also entitled to disability benefits.

The big takeaway? It always pays to stress-test claiming scenarios and keep in mind when the general rules may not apply to a client’s particular circumstance.