Shortened life expectancy puts the focus on
future survivor benefits
Jun
5, 2019 @ 12:27 pm By Mary Beth Franklin
I received a heartbreaking email from a reader
the other day asking for advice on when he should claim his Social Security
benefit given his recent diagnosis of stage 4 lung cancer. He is 61 and no
longer working. His wife is 62.
"[My wife] has worked some, but her full
retirement age benefit — or even her delayed benefit at age 70 — would never be
equal to her survivor benefit" the reader said. His wife's full retirement
age benefit is about $900 per month. His is about $2,500 at his full retirement
age of 66 and 8 months.
His wife had filed for Social Security
benefits on her own earnings record but withdrew her application before
receiving any benefits when the couple learned of his terminal diagnosis.
The couple had lots of questions about the
best way to proceed to maximize the wife's future survivor benefits. They
had gotten conflicting information from a variety of sources, including the
Social Security Administration, and asked me to help sort through the various
rules and claiming strategies.
"I guess we have a unique situation
knowing that I will most likely die before my full retirement age," he
wrote. "I was concerned about not fully understanding the rules and wanted
to make sure my wife of 40 years would get the highest benefit possible."
The reader's first question: Can his wife
claim a reduced retirement benefit on her own work record now and wait until
her full retirement age to claim the full survivor benefit?
Yes, I responded. Retirement benefits and
survivor benefits are two different pots of money. His wife could claim her own
reduced retirement benefits now at age 62, worth about $665 per month, and
still claim full survivor benefits of about $2,500 per month at her full
retirement age.
Surviving spouses and eligible surviving
ex-spouses who were married at least 10 years can choose to collect their
retirement and survivor benefits in either order and switch to the larger
benefit later. And they can do this regardless of when they were born. The new
Social Security claiming rules that
limit the ability of people born after 1953 to file a restricted claim spousal
benefits do not apply to survivor benefits.
Second question: Will her survivor benefits be
reduced if she files for her own retirement early and her husband dies before
she reaches full retirement age?
No. She can wait until she reaches full
retirement age to claim her full survivor benefits, which would be worth 100%
of what her husband was entitled to at the time of his death. If she claims
before then, her survivor benefits would be reduced.
In some cases, the age for full retirement
benefits is different than the age for full survivor
benefits.For example, the wife, who was born in 1957, has a full
retirement age for retirement benefits of 66 and 6 months, but her age for full
survivor benefits is 66 and 2 months.
Question three: The reader does not plan to
file for his Social Security, so his wife will not be receiving spousal
benefits. Will the Social Security Administration automatically start her
survivor benefits at a reduced rate when they learn of his death?
No, I replied. As long as you do not file for
your retirement benefits, she would be collecting solely on her own earnings
record and could decide when to file for her survivor benefits. But if you had
already claimed Social Security and your wife was collecting even a portion of
her benefits based on your earnings record, her spousal benefit would
automatically convert to a survivor benefit upon your death and the amount she
would receive would be based on her age at that time.
Question four: Will she get the full survivor
benefits at her full retirement age or will she have to wait until her husband
would have reached his full retirement age?
She would receive the maximum survivor benefit
if she claimed at her full retirement age for survivor benefits, I said.
Waiting beyond her full retirement age to claim would not result in a larger
amount as survivor benefits do not qualify for delayed retirement credits of
8% per year the way that retirement benefits do.
Check out Mary Beth Franklin's podcast, Retirement Repair Shop.
No comments:
Post a Comment