Social Security provides guaranteed income for life to retired workers and their spouses. Consequently, benefits tend to become increasingly important over time as other sources of savings like 401(k) plans and IRAs are gradually depleted.
Survivors benefits can play an important role in helping seniors make ends meet after their spouse passes away. Here are the important details.
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The difference between Social Security retired-worker benefits, spousal benefits, and survivors benefits
Social Security benefits can be grouped into three categories: (1) retirement, (2) survivors, and (3) disability. The first category includes two subgroupings: retired-worker benefits and spousal benefits. Here's a look at the differences.
Retired worker benefits
Retired-worker benefits depend on lifetime earnings and claim age. Inflation-adjusted earnings are run through a formula to find the primary insurance amount (PIA). The PIA is the benefit workers receive if they claim Social Security at full retirement age (FRA), which is 67 for anyone born in 1960 or later.
Workers who claim Social Security before FRA get a smaller benefit (less than 100% of their PIA) and workers who claim after FRA receive a larger benefit (more than 100% of their PIA). The precise reduction or increase depends on how many months early or late benefits start.
However, there are two important conditions: First, eligibility begins at age 62, so no one can claim earlier. Second, benefits are maximized at age 70, so it never makes sense to claim later.
Spousal benefits
Spousal benefits allow spouses to claim Social Security on the earnings record of a retired partner, so long as certain conditions are met: The spouse must be at least 62 years old, and the partner on whose record the spouse claims must be receiving benefits.
Spouses who claim Social Security at FRA will receive a benefit equal to 50% of their retired partner's PIA. But spouses who claim earlier than FRA receive a reduced amount (less than 50% of the retired partner's PIA). The reduction depends on how many months early benefits start, but it can be as much as 35%. Unlike retired-worker benefits, spousal benefits do not increase if they start after FRA.
Survivors benefits
Survivors benefits are paid to widow(er)s when their spouse dies, so long as certain conditions are met: The survivor must be at least 60 years old, must have been married for at least nine months, and must not have remarried before age 60.
The survivors benefit will equal the retirement benefit paid to the deceased spouse if the widow(er) claims benefits at FRA. Widow(er)s who claim Social Security before FRA will receive a reduced amount. The precise reduction depends on how many months early payments begin, but it can be as much as 29%.
What happens to your Social Security benefit when your spouse dies
Married couples typically receive two Social Security checks. In some cases, that means two retired-worker benefits. In other cases, it means one retired-worker benefit and one spousal benefit. Either way, one of those income streams disappears when one spouse dies.
Survivors benefits compensate for the lost income by allowing the widow(er) to keep the larger of the two payouts. If the widow(er) already gets the larger check, nothing changes when their spouse dies. However, if the widow(er) gets the smaller check, that person can replace his or her own retirement benefit with that of the deceased partner by applying for survivors benefits.
Here's an example: John and Jane have been married for 30 years. John receives $2,500 per month from Social Security, while Jane receives $2,000 per month. If Jane dies, John need not apply for survivors benefits because he already receives the larger payout. But if John dies, Jane should apply for survivors benefits. She will receive $2,500 per month (in lieu of $2,000 per month). Jane can apply by calling Social Security or visiting her local office.
Married couples may want to consider a coordinated strategy: The lower-earning spouse can claim Social Security at the age that best fits their personal circumstances, while the higher-earning spouse delays benefits until age 70. That approach maximizes the higher earner's retired-worker benefit during their lifetime, and it maximizes the survivors benefit paid to the surviving spouse if the higher earner dies first.
