Social Security is designed to give workers valuable retirement benefits. But it also pays benefits to surviving spouses and minor children after your death, giving your family further financial security when you can't provide it yourself.
Survivor benefits can be complicated, though, so in order to help you understand how Social Security can help your family, we asked three Motley Fool contributors to talk about key elements of the survivor benefit program. By keeping these rules in mind, you can make sure your loved ones will get as much as they can from Social Security.
The main thing we should all know before a death in the family is that the decisions that each family member makes regarding their own Social Security retirement benefits has a major impact on the survivor benefits that family members can claim based on that person's work history. If you don't carefully consider the impact of your choices on family members after your death, then you can cost your loved ones substantial amounts of benefits.
For instance, the most important thing to realize is that if you claim Social Security benefits early, you reduce not only the amount you will receive, but also the amount survivors will get. If you take early benefits at 62, for instance, then your surviving spouse's benefits will be 25% lower than they would have been had you waited until full retirement age to claim Social Security. If you wait until age 70 to claim, on the other hand, your spouse will benefit from delayed-retirement credits, getting 32% more in monthly survivor benefits than he or she would if you took Social Security at full retirement age.
If you're married, be mindful of your spouse before you claim your retirement benefits. What looks like a smart decision from your perspective can be a mistake from a full-family standpoint.
You also need to be aware of when you or a loved one can claim Social Security survivor benefits.
If you were married to your spouse when he or she died, you must have been married for at least nine months to be eligible for survivor benefits. The only exceptions are for those whose deaths were accidental or occurred while in active military duty.
If you are divorced and your ex-spouse dies, you can also claim survivor benefits, but only if you were married to your ex for more than 10 years. You're also ineligible if you got remarried before age 60 and haven't divorced again. The only exception to both cases is when you're caring for a child who's disabled or under age 16 and you're also eligible to receive benefits based on your deceased spouse's, or ex-spouse's, work record.
Although you can only accept regular Social Security benefits as early as age 62, you can claim Social Security survivor benefits as early as age 60. When you claim survivor benefits, your Social Security benefits based on your own work record continue to grow, accumulating delayed-retirement credits. In some cases, then, it makes sense to claim survivor benefits at age 60, allow your own benefits to appreciate, and then claim your own Social Security retirement benefits at 70. It also works in reverse: It may make more sense to claim Social Security benefits on your own work record at 62 and wait to claim survivor benefits until your full retirement age.
Everyone's situation is different. The important part is to educate yourself so you can plan and make the best decision for you.
One of the more interesting aspects of the Social Security survivor benefit is that widows and widowers aren't the only ones who can qualify.
As my colleague Dan Dzombak noted, spouses and former spouses of the deceased are eligible to begin taking survivors' benefits as early as age 60. They can receive 71.5% of the full retirement benefit of their deceased spouse. There are a few exceptions to the age rule, like when the recipient is disabled or is caring for the deceased spouse's disabled child under age 16.
But children of the deceased worker and even parents of the deceased may also qualify for benefits.
Parents can claim benefits so long as they're aged 62 or older and had at least half of their expenses covered by the deceased worker.
Children and other relatives (such as grandchildren) of the deceased may qualify if they meet a handful of criteria, such as being unmarried and under age 18 or attending a secondary school on a full-time basis and under age 19. There's also an exemption for children who are disabled before age 22 and are expected to remain disabled; they're eligible to claim survivor benefits at any age.
One final note worth mentioning: Even though you must earn 40 credits to automatically qualify your family for survivor benefits based on your work record, in the event of an early death, the Social Security Administration will provision survivor benefits to qualified beneficiaries so long as you earned six credits over the past three years.