Various studies have revealed that millions of Americans are woefully underinformed about Social Security -- which is a rather big deal, since, according to the Social Security Administration (SSA), "Social Security benefits represent about 30% of the income of the elderly."
One particular area of confusion relates to Social Security and the death of a spouse. Per the Nationwide Retirement Institute's 2023 Social Security Survey, only 56% of survey respondents knew what happens to a couple's Social Security income upon the death of one partner.
Here's a closer look at that issue.
Image source: Getty Images.
Social Security basics
Social Security is a vital program, supporting tens of millions of retired Americans. It's fairly easy to become eligible for it -- you just need to work for 40 quarters and earn at least a certain modest sum in each quarter. Thus, most people qualify after 10 years of work. Of course, the size of your Social Security benefit check is directly tied to how much you've earned -- over the 35 years in which you earned the most (adjusted for inflation). So you'll definitely want to work more than 10 years.
Each of us has a "full retirement age" -- the age at which we're eligible to start receiving the full benefits to which we're entitled, based on our earnings history. It's 66 or 67 for most workers today, and 67 for anyone born in 1960 or later.
We can start collecting our retirement benefits as early as age 62, though. Doing so mean your benefits are reduced, but you'll receive many more checks than if you hadn't started early, so starting early isn't that bad. Meanwhile, if you delay starting to collect your benefits beyond your full retirement age, they will grow by about 8% for every year you do so, up to age 70. Strategically choosing when to start Social Security is one of several ways to increase your benefits.
Social Security and the death of a spouse
Now let's get to the sad scenario of the death of one person in a marriage. Imagine Jane and Joan, who have been married for 30 years. Jane has been the higher earner, and she collects $3,330 per month from Social Security -- amounting to roughly $40,000 over a year.
Joan has a much more modest Social Security benefit, in part because she earned lower wages and also because she was out of the workforce for some years, caring for others. Her monthly benefit is just $1,841 -- roughly $22,000 per year. (By the way, $1,841 is the average Social Security benefit, as of September.)
Together, Jane and Joan have been receiving about $62,000 in total Social Security benefits over the course of a year -- $40,000 plus $22,000. (Benefits are increased in most years with cost-of-living adjustments, or "COLAs.")
Now imagine that Jane dies. Many people would assume that poor Joan will have to manage without Jane's hefty Social Security benefit and will be left with just her $22,000 for the year. Not so!
It is true that when one half of a couple dies, only one Social Security benefit check will be arriving each month, instead of two. But it's not necessarily the benefit of the surviving spouse. Instead, the survivor can choose to select the higher survivor benefits based on the deceased spouse's work history. That often allows the survivor to collect close to what the deceased spouse was receiving -- $40,000 per year in this case, instead of the $22,000 based on the survivor's work history.
Spousal strategies
Those who are married would do well to strategize and coordinate Social Security decisions. Think back to our Jane and Joan scenario, for example. While they were both alive and approaching retirement, they may have been wondering when each of them should claim Social Security benefits. One sound strategy would have been to try to delay claiming Jane's bigger benefit, until she hit age 70 if possible, in order to maximize it. That way, should Jane die first, Joan would be left with as big a benefit as possible.
The more you read up on and learn about Social Security, the savvier decisions you can make regarding it, and the more you may get out of it. Be sure that Social Security considerations are part of your overall retirement plan.
