Social Security Poster: old man (Photo credit: Wikipedia)
There are a couple of strategies for Social Security filing that surviving spouses can use to maximize benefits throughout their lifetimes. The important factor to keep in mind for the surviving spouse is that filing for Survivor Benefits (based on your late spouse’s record) has no impact on filing for Social Security benefits based on your own record – other than the fact that you cannot file for both benefits at the same time.
Coordinating these two benefits (Surviving Spouse benefits and your own benefits) can take a couple of different paths: you could file for the Surviving Spouse benefit first, allowing your own benefit to accrue Delay Credits up to as late as age 70; or you could file for your own benefit first, and then later file for the Surviving Spouse benefit.
Sue’s husband Steve passed away when Sue was 61 years of age. Steve had just turned 70 and had just begun receiving his Social Security benefit, which was increased to the maximum amount since he waited until age 70 to begin receiving benefits. His monthly benefit was $3,300, an increase of 32% over his Primary Insurance Amount (PIA) of $2,500.
Sue’s PIA is $1,500 – meaning that if she waits until her own Full Retirement Age (FRA) of 66 to begin receiving benefits, she will receive $1,500 per month based upon her own record. Sue has a couple of strategies available to her:
- She could start receiving the Survivor Benefit now at a reduced rate (since she is less than Full Retirement Age but over age 60) – for a total benefit amount of $2,481. This is still much greater than her own benefit, so she would continue with this amount for her lifetime. Annual COLAs would increase this amount when applied.
- Sue could start her own retirement benefit when she reaches age 62 (one year from now). At this point her benefit would be reduced from $1,500 to $1,125 per month since she’s filing before she reaches FRA of 66. Then she could wait until she reaches age 66 and file for the Survivor Benefit – which would not be reduced since she’s now at FRA. She would then receive the $3,300 monthly benefit, Steve’s maximized amount, for the rest of her life, increasing by COLAs when applied.
The first option provides Sue with the highest benefit right away, but she is giving up the future increased benefit that could be available if she waits to FRA. The second strategy results in the greater benefit for her as long as she lives more than 10 years beyond her own FRA.
Now, if the amount of benefits were switched and Sue’s PIA was $2,500 while Steve’s was $1,500 – his benefit at age 70 would have been $1,980. At Steve’s passing, Sue has the following options available:
- She could start receiving the Survivor Benefit now at the reduced rate of $1,489, and then begin her own benefit at FRA, for the full amount of $2,500 (plus intervening years’ COLAs).
- Or, Sue could start the Survivor Benefit now and wait until she reaches age 70, when her own benefit would have increased to $3,300 per month (plus COLAs).
- Another option would be for Sue to delay receiving the Survivor Benefit until she reaches age 66 (FRA), at which point the Survivor Benefit would be $1,980 per month plus the COLAs. Then she could wait to age 70 to begin her own benefit, again at the increased $3,300 plus COLAs.
- The last sort of option available to Sue is to begin her own benefit at age 62 at a reduced rate of $1,875. Since her own benefit is greater than the reduced Survivor Benefit, there are two ways that she might take the Survivor Benefit: 1) right away now at age 61 at a reduced rate of $1,489; or wait until FRA and take the maximized Survivor Benefit of $1,980.
The last option provides Sue with a relatively level benefit either right now (one year of $1,489 then increased to $1,875 for the rest of her life) or when she reaches age 62 next year ($1,875 for four years and then increased to $1,980 for the rest of her life).
In all cases where Sue intends to delay her own benefit, the Survivor Benefit options should be considered. The key to it all is that either benefit can begin first, followed by the other later if it results in an increase in benefits. Also important to note is that you can’t start Survivor Benefits early, switch to your own, and then switch back to Survivor benefits (or vice versa). Once you’ve switched between the two types of benefits once, you are not allowed to switch again.
There are many other ways that the benefit amounts and ages could be worked out for examples, but hopefully these examples have helped to explain the decision process.
