This is one of those very complicated and difficult to understand areas of the Social Security universe, but it’s very important to know what amount of benefits a surviving spouse will be eligible for upon the passing of his or her spouse.
There are different rules that apply, depending upon whether or not the late spouse was already receiving benefits based on his or her own record, as well as the age of the surviving spouse when he or she begins receiving survivor benefits.
We’ll look at the easy one first: when the late or decedent spouse was not already receiving benefits based on his or her own record.
When The Decedent Spouse Was Not Receiving Benefits
In the case where the late spouse had not already begun to receive benefits based upon his or her own record, there are three factors that you need to take into account: the age of the surviving widow(er), the age of the decedent at death, and the Primary Insurance Amount (PIA) of the decedent. PIA is the amount that the late spouse would receive in benefits at his or her Full Retirement Age (FRA).
If the deceased was younger than or exactly at Full Retirement Age, then the PIA is the operative amount of benefit for our calculation. In the event that the deceased was older than FRA, he or she would have accrued Delayed Retirement Credits (DRCs) which would have the effect of increasing the benefit amount that the surviving widow(er) is eligible for. These credits are equal to 8% for each year (2/3% for each month) beyond FRA that the deceased spouse lived, up to age 70. Past age 70 there are no additional DRCs.
See below (The Age of the Survivor) for the last portion of the calculation.
The Age of the Survivor
The last factor is the age at which the surviving spouse begins receiving the Survivor Benefits. These can begin as early as age 60, at which point the benefit will be reduced to 71.5% of the benefit determined in the paragraph above. Between age 60 and Full Retirement Age (of the surviving spouse) the amount of benefit increases pro-rata to eventually equal 100% of the deceased spouse’s benefit (determined above). There is no additional increase if the surviving spouse delays receipt of Survivor Benefits after FRA, although these benefits can begin at any age thereafter at 100%.
If the Decedent Spouse Was Already Receiving Benefits
This calculation is much more complicated. When the deceased is already receiving benefits, we need to work through some additional calculations.
To start with, if the late spouse started his or her benefits at or after FRA, then the amount of benefit for our calculation is equal to the actual monthly benefit amount that the deceased was receiving upon his or her death.
On the other hand, if the deceased had started receiving benefits prior to FRA, the amount of his or her benefit would be something less than his or her PIA. If that’s the case, the Social Security rules have determined that the operative amount of benefit might be something more than the amount that the deceased was receiving upon his or her death.
Here’s how it works: Three amounts are calculated – 1) the amount of benefit that the decedent was actually receiving; 2) the reduced benefit based on the PIA of the decedent and the survivor’s age (see the paragraph above “The Age of the Survivor” for details on this calculation); and 3) 82.5% of the PIA of the decedent. These three amounts are listed from lowest to highest, and then the following determination is made: if #2 is less than either of the others (#1 & #3), then that amount is used for the calculations. If #2 is the greatest of the three amounts, then the greater of the other two amounts is the benefit amount used for the calculations.
I realize that computation is very complex and convoluted, so here’s a brief example:
Let’s say that Jane is the surviving spouse, and Dick had started receiving his SS benefit earlier this year at age 62. Jane is now 64. If Dick’s PIA was $2,000, then when he started receiving his benefit at age 62, it was reduced to $1,500.
So, we run our calculations to come up with the three figures: 1) $1,500 (actual benefit that Dick was receiving); 2) the reduced benefit based upon Dick’s PIA and Jane’s age, which calculates to 90.167% times $2,000, or $1,803; and 3) $1,650 (82.5% of Dick’s PIA).
Arranging these figures from lowest to highest gives us 1,3,2. As described above, if #2 is the largest of the three figures, then the larger of the others is the actual benefit – so #3, $1,650, is the amount of the survivor benefit that Jane is eligible for, in these circumstances. This is the maximum amount of Survivor Benefit that Jane is allowed.
Hope this helps to clear up a very complex set of rules!A Social Security Owner's Manual, 2013 Edition, can be purchased by clicking this link. If you'd prefer the Kindle version (and let's face it, ALL the cool kids do!), you can find that at this Kindle version link.