What Happens to My Spouse's Social Security Benefit If I Die?
By Laurence Kotlikoff
Taking survivor benefits early will reduce their value, warns Social Security expert Larry Kotlikoff. Photo by Purestock via Getty Images.
Larry Kotlikoff's Social Security original 34 "secrets", his additional secrets, his Social Security "mistakes" and his Social Security gotchas have prompted so many of you to write in that we now feature "Ask Larry" every Monday. We are determined to continue it until the queries stop or we run through the particular problems of all 78 million Baby Boomers, whichever comes first. Kotlikoff's state-of-the-art retirement software is available here, for free, in its "basic" version.
Burt -- Naples, Fla.: I am 60 and have just received my age-66 benefits due to being disabled with a potentially deadly disease. My wife is 56. Does she have any rights to my benefits should I die? If I live, how does this affect at what age she should apply for maximum effect/returns? Can she collect on my benefits if I do not die? Should she suspend? I am confused, to say the least.
Larry Kotlikoff: I'm extremely sorry to hear this news. Life is a terrible game of Russian roulette and horribly unfair.
If you do pass away, your wife will be able to collect survivor benefits starting at 60. But if she takes them before her full retirement age, they will be permanently reduced. When she is 62, she can start taking reduced retirement benefits. The way for her to maximize her lifetime benefits is to take one of the two benefits earlier, while waiting for the other benefit to grow.
There are three strategies. Only software provided by my or other companies will be able to say which is best. But here are the three strategies: First, she can take her survivor benefit at 60 and wait until 70 to take her retirement benefit when it will be as large as possible.
Second, she can wait until full retirement age to take her survivor benefit and until 70 to collect her retirement benefit. This will give her an unreduced survivor benefit between full retirement and 70. However, it's very unlikely that this strategy will beat out the first strategy.
Or she can take her retirement benefit at 62 and start her survivor benefit at full retirement age when it will be as large as possible. If your wife's age-70 retirement benefit exceeds your disability benefit, which is your full retirement benefit and will determine her survivor benefit (unless, there is always an "unless" with Social Security, you withdraw your retirement benefit at full retirement and then start it later, at a higher level), I expect the first strategy will be best.MORE FROM LARRY KOTLIKOFF: Is It Worth Taking Social Security Early and Investing the Benefits?
If you survive your disease, and Paul and I pray you do, you'll want to consider my discussion of how disabled workers can maximize their own benefits.
If you now have any children under 16 or any disabled children, your wife can immediately begin collecting a full spousal benefit equal to half of your disability benefit. If not, when your wife is 62, if you are alive, she can begin collecting reduced spousal benefits. If she waits until full retirement age, she can collect unreduced spousal benefits.
If your wife works through full retirement age, she may lose all or some of her benefits, be they survivor, spousal or retirement benefits, due to the earnings test. But some of these benefits and, potentially all, will be compensated by higher benefits starting at full retirement age.
Danielle McSwain -- Columbia, S.C.: My mother retired at age 62 and recently passed at age 64. She was receiving Social Security benefits prior to her death in June of this year. My father is still working full time and would like to work until he's 70. Should he wait to apply for spousal benefits until 66? Does he need to do anything now, or should he wait until 66 to do anything with Social Security?
Larry Kotlikoff: Very sorry, as is Paul, for your loss. Big, big blow.
Your father can't receive spousal benefits because your mom has passed away. But he can receive survivor benefits. And starting at 66 -- full retirement age, he should start collecting them, but just them; he should wait until 70 to start his own retirement benefit. This presumes that he has a reasonably long maximum age of life. (Note that maximum age of life refers to the oldest age to which you could live, likely 100, whereas expected age of life refers to the age to which, on average, someone in your economic and physical condition would likely live).
As soon as possible, your father should apply for the $255 lump sum death benefit, assuming that he hasn't already done so. He should also check with the Social Security Administration no later than January of the year he attains full retirement age to see if his earnings would permit payment of any reduced widower's benefits in the months before he attains full retirement age.
Cheryl -- San Antonio, Texas.: I have been a widow for 13 years and I make $57,000 per year as full time social worker. Can I continue to work full time and collect Social Security from my deceased husband's record without suffering penalties when I take my own Social Security at age 70? I am 62 and plan to continue to work past 70 and beyond in social work. Thank you so much for your willingness to answer my question; Social Security offices in San Antonio are not that great.
Larry Kotlikoff: Widows and widowers can start collecting survivor benefits as early as age 60, but the benefits will be reduced for every month one collects these benefits prior to full retirement age. For example, taking survivor benefits at 60 lowers them permanently by 30 percent compared to their value if you start taking them at full retirement age, which is 66 in your case.
In addition to getting lower benefits forever, you'll lose some or all of your survivor benefits due to Social Security's earnings test, which reduces your benefits if you earn too much prior to reaching full retirement age. This year, since you are 62, if you take your survivor benefit, you can earn up to $15,120 before losing 50 cents on the dollar in benefits due to the earnings test. This $15,120 level is indexed to the economy's average earnings, so next year it will be higher.
In the year you attain full retirement, the limit is higher. Currently, it's $40,080, and the benefit loss is $1 for every $3 you earn. This limit also rises each year with average wages. Also, the minute you reach full retirement age -- the minute after your 66th birthday, the earnings test goes away. So the $40,080 limit only applies for the part of the year in which you'll reach full retirement, but before you do.
Now, what's best for you? You really don't have to worry about the earnings test since at full retirement age, Social Security will reset your benefits to a permanently higher value to reflect the months of the benefits you lost due to the earnings test. But if you end up getting any benefits, then you need to realize that your survivor benefits will permanently be lower as a result.
If your reduced survivor benefit is larger than your full retirement benefit, even if you wait until 70 to collect it, you'll end up getting a total benefit that simply equals your reduced survivor benefit -- for the rest of your life! So you need to be careful here. Yes, once you start taking your own retirement benefits, Social Security will, in the case your actual check doesn't go up, claim to be giving you your retirement benefit plus a reduced survivor benefit.
But that's just their deceptive lingo. In fact, if your survivor benefit, even reduced, exceeds your retirement benefit, Social Security will be giving you, in truth, absolutely nothing extra back in exchange for all your years and years of contributions to the system. No surprise -- it's a poorly and unfairly designed system often conveyed in ways to disguise its flaws.
Note, however, the good folks at Social Security aren't to blame for this. Blame six decades of our members of Congress and their legal staffs who concocted this monstrosity with little care for fairness and transparency, allowing people to make terribly wrong Social Security choices because they don't understand the system's arcane, deceptive and misleading provisions.
Bottom line for you -- be careful what you ask for. It may be best to take survivor benefits now and retirement benefits at 70. Or it may be best to take survivor benefits at 66 and retirement benefits at 70. Or it may be best to take retirement benefits now and survivor benefits at 66. What's best depends on your earnings record and that of your late spouse, as well as how much you will be earning prior to age 66. Software is your answer. It can sort out your best options.
Richard -- Capitola, Calif.: I am a 66-year-old man who has not yet applied for Social Security, preferring to wait for the increased benefits when I turn 70. I have been living with a woman who is 70-years-old and is receiving Social Security benefits. If we were to marry, would I be eligible for spousal benefits, and if so, when could I start receiving them?
Larry Kotlikoff: Yes, if you marry, after one year, you can apply just for spousal benefits and receive half of her full retirement benefit. If she was a high earner, this can easily pay for the wedding and a very nice honeymoon.
Alternatively, you can file for your retirement benefit and suspend its collection and get her an excess spousal benefit. But my guess is that your getting a full spousal benefit beats her getting an excess spousal benefit, at least between 67 and 70. Once you start collecting your own retirement benefit, you'll get an excess spousal benefit, or she will or neither of you will, depending on what your earnings records have been.
To put icing on this cake, if you pass away, your new bride will receive a survivor benefit if your retirement benefit, inclusive of delayed retirement credits accrued prior to your passing away, exceeds her benefit, which may have been reduced if she took it early. The Social Security Administration will describe this as her receiving her own retirement benefit plus the difference, as a survivor benefit, between your retirement benefit (inclusive of delayed retirement credits) less her benefit. Or, if she dies first, you can collect a survivor benefit based on her retirement benefit at the time she passes away.
Bottom line: Social Security is providing you a big incentive to get married. Just learn to do the dishes and lower the toilet seat, and all will be fine.
Nita -- Cleveland, Ohio: How does the windfall elimination work? I worked contributing into Social Security from 1976 to 2001. I worked contributing to the Public Employees' Retirement System (PERS) from 2001 to mid-2011 and was credited 9.75 years in PERS. Social Security did not give me my full pension in 2012 when I reached my retirement age of 66. I was penalized for working outside Social Security. I am working part-time to make up the difference in my Social Security benefits. How long do I have to work to start collecting my full Social Security retirement?
Larry Kotlikoff: If you have fewer than 20 years of substantial earnings ($21,075 in 2013) in Social Security-covered employment, the formula for your full retirement benefit, called your Primary Insurance Amount (PIA), is different thanks to the Windfall Elimination Provision (WEP).
This formula has three brackets that take in your Average Indexed Monthly Earnings (AIME) and come back with your PIA. The first bracket is 90 percent. But if you worked in non-covered employment, which is your case, and are receiving a pension from it or are withdrawing from a retirement account plan established on that job, your first PIA bracket will be modified to only 40 percent -- a 50 percentage point spread.
For every year of substantial earnings beyond 20, you can lower that spread by five percentage points. So if you now have 20 years and work an extra 10, you'll entirely eliminate the WEP. But according to what you wrote, you already have 26 years of substantial earnings. So just work for four more years and you'll get your full check!
Daryl Magedoff -- Boca Raton, Fla.: I am approaching 66 and am still working. Can I collect 50 percent of my husband's current Social Security benefits and then collect my own at age 70?
Larry Kotlikoff: Yes.
Diana -- El Paso, Texas: My husband passed away at the age of 62 without claiming his Social Security benefits. He was retired at the moment of his death. I am 45. What would happen to his Social Security benefits if I were to remarry?
Larry Kotlikoff: If you remarry before 60, you'll get no benefits on your first husband's earnings record for as long as you remain married.
However, if you had happened to qualify for disabled widow's benefits between ages 50 and 60 (not your case, I know), you can remarry anytime after that without losing his benefits.
You'll get no benefits from your first husband's earnings record unless you are caring for his child, and the child is either under 16 or disabled. But if you remarry after age 60, you can receive survivor benefits, as early as age 60, on your first husband's work record.