Making a video that covers Social Security Survivors benefits is a project that I’ve put off for several months. However, I went to FinCon, a financial media conference, and realized that I needed to get off of my laurels and get some of this helpful content produced. I hope you find this video useful.
I’ll put a transcript below if you want to read along.
Transcript is below:
Not long ago, the Social Security Administration was caught underpaying nearly 10,000 individuals the survivor benefits they were rightly entitled to receive. This amounted to over $130 million in benefits. How could this happen? The report placed the blame squarely on the shoulders of the social security administration. But the truth is, it happened because the individuals who were receiving these benefits didn’t fully understanding how to calculate them and know what they were even supposed to be receiving. So in today’s video I want to give you a crash course on social security survivor benefits so the same thing won’t happen to you. Let’s dive in.
So we’re about to take a deep dive into social security survivor benefits, but before I fill up your mind with all of that information, I want to remind you of a couple of things. Number one, if you want to see more videos on social security and (retirement planning topics in general), subscribe to my channel and be sure to hit the notification bell. That way every time I produce a new video, you’ll see it pop up in a notification. Second, download the blueprint guide to my bestselling Amazon book Social Security Basics. This guide that you’ll download is the distilled version of that book, and really the best part is it’s free. It covers all of the social security basics including the one we’re talking about today. There’s a link in the description. So be sure and check that out.
You know social security survivors benefits might be the one thing about social security that I can give a simple answer to; it goes like this. At the death of the first spouse, surviving spouses are entitled to receive the higher of their own monthly benefit or the monthly benefit of the deceased. Now that’s the clean and straightforward answer, but of course it’s not quite that simple in real life.
So I wanna go into the nuances of how the benefit is calculated. But first, before we get there, we need to know who is entitled to receive these benefits. There are three types of individuals who are eligible to receive these benefits. One, surviving spouses. Two, former spouses. And three, children of the deceased person. So for the purposes of this video, I wanna concentrate on the benefits that surviving and former spouses are entitled to. But no conversation about survivor benefits would be complete without at least mentioning the benefits available to children.
When I checked the guide for 2018, children receive somewhere around 30% of all survivor benefits. So an eligible child is one who is unmarried, younger than 18 or up to 19 if they’re still in school, or any age if they have a disability that began before they turned 22. So then now let’s look at the eligibility criteria for spouses, which is where I wanna spend the remainder of this video.
First, let’s look at surviving spouses. In order to qualify for a survivor’s benefit, a surviving spouse must’ve been married for at least nine months. Now there are multiple exceptions to that nine month rule, and I’m gonna put a link in the comments below that has some more information on those exceptions. Now these benefits can begin as early as age 60, as opposed to 62 for normal retirement benefits. And if you’re disabled, those benefits can begin as early as age 50.
Now, one of the important caveats to these rules is if you’re caring for a child of the deceased spouse, and that child is less than 16 or disabled. In that scenario there is no minimum age at which you can start to receive survivor benefits. The criteria for former spouses is slightly different. To receive survivor benefits from a former spouse, you must be at least 60 and have been married to them for a least 10 years before your divorce occurred. One exception to this 10 year requirement is again, if you’re caring for the ex-spouse’s child who is either less than 16 or disabled.
Now you must also currently be unmarried, unless you get remarried after the age of 60, or 50 if you’re disabled. In that case, you can still get a survivor benefit from a prior spouse.
So now that we know who’s eligible to receive a survivor benefit, let’s move onto how it’s calculated. This is the fun part. As I said at the beginning of this video, there’s a simple way to explain social security survivor benefits. And it’s simply that at the death of the first spouse, surviving spouses receive the greater of their own benefit, or the benefit of the deceased. But that simple explanation just doesn’t consider the three factors that can impact the benefit amount.
Number one, did the deceased file for benefits before they died? Number two, at what age did the deceased file for benefits? And number three, at what age will the surviving spouse file for benefits? Now that third factor’s gonna play an important part in the overall calculation. But before we get into that, let’s look at how things change based on whether or not the deceased filed for benefits before they died.
So first, let’s look at if the deceased spouse did not file for benefits. So if the deceased spouse never filed for benefits, but died on or before their full retirement age, the calculation is relatively easy. The survivor receives the deceased spouse’s full retirement age benefit, adjusted for the survivor’s filing age. And again, I’ll get to those adjustments a little later on. They will play a pretty important role. If the deceased spouse never filed for benefits, and died after their full retirement age, the survivor receives the deceased’s benefit in the same amount as if the deceased would have filed on the day of death. And this does include any delayed retirement credits. But it is all again, reduced for the filing age of the survivor.
But what if the deceased spouse filed for benefits before he or she passed away? If this is the case, it gets a little more confusing. So first, if the deceased spouse filed for benefits on or after their full retirement age, and the surviving spouse is at full retirement age, the benefit amount payable to the surviving spouse will remain unchanged. But if the surviving spouse is less than full retirement age, the amount the deceased spouse was receiving would be reduced by the filing age of the survivor.
Here’s where it gets tricky. If the deceased filed for benefits before their full retirement age, the surviving spouse is entitled to the full retirement age benefit of the deceased, again, that’s reduced for survivor’s filing age. But it will always be limited to the larger of the actual benefit of the deceased, or 82.5% of the deceased full retirement age benefit.
This 82.5% limit is a special role, it’s often called the widow’s limit. The technical name is the retirement insurance benefit-limitation, which the social security administration generally refers to as the RIB lim. Now it’s meant to offer some protection for surviving spouses when the deceased spouse filed at or near the earliest date possible.
So I wanna slow down here, and really cover this widow’s limit. This has tripped up many surviving spouses, and caused them to delay their benefits longer, and sometimes years longer than they should have. But to fully understand how this works, you have to understand how the benefits change based on the age of the survivor. And this goes back to that third factor in the calculation that we talked about earlier. Assuming your full retirement age is 67, your survivor benefit will be reduced if you file for benefits early.
So let’s start at the top of the chart. If you’re disabled you can file for benefits as early as age 50. If you’re not disabled, you can file at age 60. But in both cases, you receive a benefit reduction for filing early, and you would only receive about 71.5% of the benefit you would receive at age 67. Looking at the chart, you’ll see how the percentage of benefit increases as you get closer to full retirement age, however there is one case where a good part of this chart becomes completely irrelevant.
That is if your deceased spouse filed for benefits at or near the earliest age possible. In that case, you will be forever limited to 82.5% of their full retirement age benefit amount. Even if you delay to your full retirement age. If you look at the chart you’ll see that you would be at that percentage of benefits somewhere in between 62 and 63. This means that even if you keep waiting, your survivor benefits will not increase. So it may make sense for you to file as early and as quickly as you hit that 82.5% cap.
Now, since the full retirement age has been changing, the point where you hit that cap is dependent on your year of birth. But it’s somewhere in between 62 and 4 months and 62 and 7 months old. You may wanna hit the pause button right here and find your own year of birth if this is your situation.
Now that we’ve covered the calculation of the survivor’s benefit, I’d like to spend some time covering one of the last remaining advanced filing strategies that are still available. This is the strategy that the office of the inspector general was referencing when they chastised the social security administration in their 2018 report.
So if you have both a benefit from work you did, and a survivor’s benefit, it could make sense to file for one, and later switch to another. For example, you could file for a survivor benefit as early as age 60, and switch to your own benefit as early as age 70, at which point it should’ve grown and would be considerably larger.
Let’s use an example here for Paula. So at Paula’s full retirement age she has a benefit of $1,500 from her own work, and a survivor’s benefit of $1,600. Let’s just assume that her full retirement age is age 67. So using the advanced filing strategy that we just discussed, she could file for the survivor’s benefit at age 60. Now there would be a reduction due to her age, so she would start receiving around $1,144 per month. At age 70 she could simply switch back to her own benefit, which would’ve grown to $1,860.
Over her lifetime that filing strategy could make a big difference in her total income. There’s one last thing that we have to talk about, if you’re thinking about filing for survivor’s benefits, or any benefit before full retirement age you have to keep in mind that the social security administration imposes a limit on the amount of income you can earn from work.
Now this limit changes every year, but for 2018 it’s $17,040. The one exception is the year you attain full retirement age, and in that year you can earn up to $45,000 and some change. But once you hit full retirement age, there is no limit on the amount of earnings that you can have.
I know we’ve covered a lot of material in this video. Don’t hesitate to go back and re watch any of the parts that you need clarification on. You could also find a lot of this information on my website, socialsecurityintelligence.com, or on the free blueprint guide to my book that I mentioned at the beginning of this video. Also, please subscribe to this channel if you wanna see more videos like that. And most importantly, have a fantastic week. Thanks for watching.