When it comes to preparing for the inevitable, couples may very well not think about the Social Security benefits that a surviving spouse can receive. But they should. And they have to go that far before claiming benefits based on their own track record.
What married couples need to know? survivor benefits — while both are still alive — is that the surviving spouse’s income will depend on when the higher-earning spouse claims their benefits, says Elaine Floyd, the director of retirement and life planning at Horsesmouth, a provider of educational materials to financial advisors.
If they claim at 62, the survivor benefit becomes 82.5% of that higher earner’s primary insurance amount, she says. And if they claim at 70, delayed credits and can go up to 124% of the basic insurance amount.
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The main insurance amount, according to Social Security, is the benefit a person would receive if he/she chooses to receive retirement benefits at his/her normal retirement age. This amount will not be reduced if you retire early or increased if you postpone.
Floyd gives this example: For example, if the higher earner’s PIA is $3,000, the survivor benefit could range from $2,475 to $3,720, depending on when that spouse claims.
Delay Social Security Claims to 70
Ultimately, what survivors need to know is that their survivor benefit will depend on when they claim it, Floyd says. Taking it before full retirement age reduces their benefit.
They can maximize their survivor benefit by starting it at full retirement age, or later. In fact, Floyd’s “number one advice for married couples is that the highest-earning spouse claim their own retirement benefit at age 70.”
Do you get more by taking your benefit – or that of your partner – first?
Although it is often overlooked, there is another way to maximize the benefits of the surviving spouse according to: Heather Schreiber, the chairman of HLS Pension Advice“If the surviving dependent is entitled to both old-age and survivor benefits, he/she can choose to apply for the lower benefit first and then switch to the higher benefit later,” she explains.
Schreiber gives this example: Suppose Jane, 62 years old and retired, recently lost her husband who was collecting $2,000 a month at the time of his death. Jane’s estimated monthly retirement benefit at her full retirement age of 67 is $1,800.
She could choose to claim survivor benefits now (generally, the earliest age at which a surviving spouse can claim survivor benefits is 60, unless incapacitated). She would receive 71.5% of the survivor benefit, or $1,430.
By not including her retirement benefit in the scope of her initial application, she could switch to her own retirement benefit at age 70. Including the deferred retirement credits earned, her retirement benefit at age 70 would be $2,232 ($1,800 x 124%) per year. month.
Mike Piper, author of “Social Security made simpleAlso recommends using this strategy: For people who have already lost their spouse, it generally makes sense to 1) file your retirement benefit as early as possible, while growing your survivor benefit until it peaks at your survivor FRA (full retirement age), or claim your survivor benefit as early as possible (age 60), while growing your retirement benefit until it peaks at age 70.
You may be subject to the Retirement Income Test
Surviving spouses who claim their survivor benefits before full retirement age and continue to work should also know that their benefits will be subject to the so-called retirement income test.
Essentially, for 2021, Social Security will withhold $1 in benefits for every $2 in income over $18,960 before you reach full retirement age. Please note: benefits withheld while you continue to work will not be lost; they are added to your monthly allowance once you reach FRA.
Ex-spouses can claim benefits
Even former spouses who have been married for more than 10 years can claim survivor benefits, provided they either unmarried or remarried at age 60, says Schreiber. Remarriage at age 60 or later also entitles a widow of a deceased spouse to: claim benefits based on the file of the first spouse.
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This article originally appeared on USA TODAY: Social Security: 4 things to know about survivor benefits