Beware The Blackout Period
As noted earlier, a widow or widower generally doesnt qualify for their benefits until age 60. However, that person can collect payouts as the caregiver for the deceaseds children until they turn 16.
Children qualify for benefits until they turn 18 . But between the childs 18th birthday and the spouses 60th birthday , no one in the family is eligible to collect. Thats whats known as a blackout period.
For example, a woman is left widowed at the age of 30 with a two-year-old son. As her sons caregiver, she is entitled to collect Social Security benefits for 14 years, until his 16thbirthday. After that, her son continues to receive his survivor benefits for two more years, until hes 18. His mom will be 48 at that point, leaving the family ineligible for any payments until her widows benefits become available when shes 60. In this case, the Social Security blackout period lasts 12 years.
One possible solution is for families to make sure they have adequate life insurance to support a surviving spouse during any blackout period. Take, for instance, a couple, both 31 years old, who recently had a child. If either parent dies, the surviving spouse is eligible to collect benefits until they are 47 years old . If they both buy 30-year term life insurance policies and keep up with the premiums, theyll be assured of coverage until age 61one year after Social Security eligibility is reinstatedin case one of them dies.
How Can A Married Couple Maximize The Surviving Spouses Benefits
Im glad you asked! Many Americans are so excited to start collecting checks when they hit their sixties that they forget to plan a Social Security strategy that makes sense for their spouse, too. The age at which you begin taking retirement benefits affects how much your monthly payments will be for the rest of your life and beyond. Your filing age will set the amount that will go to your survivors as Social Security death benefits.
The Bipartisan Budget Act of 2015 changed the auxiliary benefit rules in important ways. First, as of April 30, 2016, the file-and-suspend strategy for maximizing spousal benefits is no longer allowed. That strategy allowed one member of a couple, usually the higher earner, to file for primary benefits at 62 and then suspend those benefits, allowing them to grow until the filer reached age 70. In the meantime, the first persons spouse would file for spousal benefits and let his/her own primary benefits grow. It was a lucrative strategy for those lucky folks who took advantage of it, but it has been phased out.
For everyone else, if you file for your own benefits before age 70 and then have a change of heart and decide you want to take advantage of Delayed Retirement Credits, you can still suspend your benefits. But if you suspend your benefits, any benefits based on your record will be suspended, too. Retirees who un-suspend their benefits will no longer get a lump sum payment as of April 30, 2016.
How To Calculate Your Own Social Security Spousal Benefits
The spousal benefit calculation is straightforward if you dont have a benefit of your own. Remember, in that case, its between 32.5% and 50% of the higher-earning spouses full retirement age benefit, depending on your filing age.
However, it can seem a little more complicated if you have Social Security benefits from your work history.
And to keep things interesting, the Social Security Administration decided that a different calculation method should be used to determine how much each benefit should increase/decrease based on your filing age.
Fun, right?
As complicated as Social Security benefits can seem, there is a way to correctly calculate how much your spousal benefit will be if you qualify to receive it.
Check out this section of my video that goes over this calculation step-by-step. VIDEO: How To Calculate Spousal Benefits The RIGHT Way
If you understand how they break down the individual benefits, its not hard to use the table above to quickly figure out what your approximate benefit will be. Heres an example.
Joe and Julie each have a Social Security benefit from work they individually performed. Julies benefit at her full retirement age is $800 per month. Joes benefit at his full retirement age is $2,000.
Assuming they are both full retirement age when they file, Joe will be entitled to a benefit of $2,000 and Julie will be entitled to the greater of her own benefit or half of Joes benefit.
Sounds simple, right?
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What If I Delay Taking My Benefits
If you retire sometime between your full retirement age and age 70, you typically earn a “delayed retirement” credit for your own benefits . For example, say you were born in 1960, and your full retirement age is 67. If you start your benefits at age 69, you would receive a credit of 8% per year multiplied by two . This means your benefit would be 16% higher than the amount you would have received at age 67.
Social Security Benefits Calculator
Do you wonder how much you might receive in Social Security? Use this calculator to help you estimate your Social Security benefits. Remember, this is only an estimate. Your actual benefits may vary depending on your actual work history and income.
This illustration does not take into account certain fees and expenses that may be charged to your investment. Webster Five does not provide tax or legal advice. You should contact your tax or legal adviser concerning your particular situation. Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes only. We encourage you to seek personalized advice from our qualified professionals regarding all personal finance issues.
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Social Security Benefit Calculator
Social Security benefits can be an important factor to consider in your future retirement income. Use this calculator to estimate what your retirement benefit amount could be.
An Ameriprise advisor can look at your overall financial picture and provide personalized advice to help you meet your retirement income goals.
What About My Ex
Spousal benefits for divorced spouses are affected by the Bipartisan Budget Act, too. Previously, divorced spouses who were married for 10 years or more could claim reduced auxiliary benefits from their exs record when they reached age 62, or full auxiliary benefits when they reached full retirement age, all while letting their own benefits grow. Thats no longer the case as of April 30, 2016.
If youre divorced and you turn 62 on or before January 1, 2016, you can still file a Restricted Application and receive your divorced spousal benefits, waiting until age 70 to claim your primary retirement benefits. But those who arent in that age group will no longer be able to claim spousal benefits without claiming their primary benefits. Like still-married spouses, ex-spouses will be assumed to be claiming all their benefits when they first file.
Note that a divorced spouse married for 10 years or more can claim full auxiliary benefits on their exs record at any age if he or she is caring for the dependent minor child of the ex-spouse.
Also, the divorced spousal benefit for people whose ex-spouses are still alive is lower than the divorced widows benefit.
If you remarry, it doesnt keep your ex from being eligible to claim benefits on your record. But having an ex who is claiming benefits on your record wont keep your new spouse from being able to claim benefits either.
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What Is An Insurable Interest Survivor Benefit Election
If youre in good health and you retire for reasons other than disability, you can elect to provide a survivor annuity to someone with an insurable interest. You can elect to provide an insurable interest benefit and the maximum survivor benefit for a current spouse or an ex-spouse . Spousal consent is not required to name an insurable interest if youve elected a maximum survivor annuity for your current spouse. However, if youre married and elect an insurable interest benefit for your current spouse, spousal consent is required because your current spouse must waive their right to normal survivor benefits.
If you elect an insurable interest benefit, youre responsible for arranging for and paying the cost of any medical examination required to show youre in good health. A report of the medical examination should be included with your retirement application.
Can My Surviving Spouse Claim My Social Security Death Benefits And Their Own Primary Benefits
Nope. Auxiliary benefits were designed to protect the non-working spouses and children of workers, not to provide extra money to surviving spouses whose work histories make them eligible for benefits on their own record.
A surviving spouse whose age and labor force participation make them eligible for primary Social Security benefits should not expect to receive full Social Security death benefits on top of their own check. The Social Security Administration wants to guard against what it considers excess benefits, so will adjust the benefits of anyone who is eligible for both spousal/death benefits AND primary benefits.
Social Security will pay out the larger of either the spousal/survivor benefits or the primary benefits, but not both. This is known as the Dual Entitlement Rule. So, if you consistently earned more than your spouse and your spouse predeceases you while youre both claiming Social Security, you wont get an income boost because your primary Social Security benefits are greater than the death benefits youre eligible for.
If youre a widow or widower youre eligible to claim death benefits beginning at age 60, or age 50 if youre disabled. You can claim auxiliary benefits while letting your own benefits grow until you reach age 70. Alternatively, you can claim your own benefits beginning at age 62 and wait until later to claim auxiliary benefits.
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Strategy For Widowed Spouses
Widows and widowers may receive full benefits at their full retirement age or reduced benefits as early as age 60, as explained in the sections above. Remarrying after age 60 will not affect your eligibility for survivors benefits. However, it may be more convenient for you to forego your widow or widower spousal benefits depending on your circumstances.
If your current spouse is also eligible for Social Security benefits and earns more than your former spouse, you may wish to apply for spousal benefits based on your new spouseâs record instead.
If you are collecting a survivor benefit, but also qualify for a benefit on your own, you may wish to collect a survivor benefit in the early years of retirement and leave your own Social Security benefits to accrue delayed retirement credits. Then, you can switch to your own retirement benefit as late as age 70.
When Should You Claim Spousal Benefits
Timing matters when deciding when to claim spousal benefits. Again, taking benefits before full retirement age can reduce the number of benefits that youre eligible to receive. However, delaying spousal benefits beyond full retirement age wont increase the benefit amount, the way that it would regular retirement benefits.
When deciding how to time spousal benefits or retirement benefits, it helps to look at the bigger picture and consider:
- Life expectancies and how long you and your spouse anticipate relying on Social Security benefits
- Health and the possibility of one or both of you needing long-term care at some point
- Other income sources, including investments, a 401 or IRA or money earned from part-time work or side jobs
- Retirement budget and estimated expenses
Living longer, for example, might make delaying Social Security benefits more attractive. On the other hand, if you dont have sufficient savings and investments then you might need the additional income that Social Security can provide sooner rather than later.
If youre confused about when to take spousal benefits or whether you can switch your retirement benefit to spousal benefits, talking to a financial advisor can help. An advisor whos well-versed in Social Security planning can help you to decide on the right time to claim those benefits.
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Claiming Early Or Late
Your spousal benefit is based upon your partner’s “normal” benefit amount. But the amount you receive will depend upon when you begin to claim it.
You can claim spousal benefits as early as age 62, but you won’t receive as much as if you wait until your own full retirement age. For example, if your full retirement age is 67 and you choose to claim spousal benefits at 62, you’d receive a benefit that’s equal to 32.5% of your spouse’s full benefit amount.
The amount increases with each year you delay. At your full retirement age you’d be eligible for the maximum, which is 50% of your spouse’s full benefit.
Notably, spousal benefits are not reduced if the spouse is caring for a child who qualifies under the age or disability rules. Spousal benefits can never exceed 50% of the other spouseâs full benefit. So, there is no incentive to file for spousal benefits later than your own full retirement age.
An ex-spouse may be eligible for spousal benefits even if the former spouse hasn’t retired yet.
Your Government Pension May Affect Social Security Benefits
The Government Pension Offset, or GPO, affects spouses, widows, and widowers with pensions from a federal, state, or local government job. It reduces their Social Security benefits in some cases.
If you receive a pension from a government job but did not pay Social Security taxes while you had the job, well reduce your Social Security spouse, widow, or widower benefits by two-thirds of the amount of your government pension. This offset is known as the GPO.
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Do You Plan To Continue Working In Your 60s
Working in your 60s will help you maximize your income and savings.
Your benefits are based on your highest 35 years of earnings. Each year of work can add higher earnings to your record by replacing years with low earnings such as those when you were a student, were unemployed, or took time off to care for someone. When you work and wait to claim until age 70, you can increase your monthly benefit by more than 75 percent! Working in your 60s also gives you more time to save on your own for retirement.Review your earnings record on my SocialSecurity.
Working in your 60s will help you maximize your income and savings.
Your benefits are based on your highest 35 years of earnings. Each year of work can add higher earnings to your record by replacing years with low earnings such as those when you were a student, were unemployed, or took time off to care for someone. When you work and wait to claim until age 70, you can increase your monthly benefit by more than 75 percent! Working in your 60s also gives you more time to save on your own for retirement.Review your earnings record on my SocialSecurity.
You can maximize your benefits even if you work fewer hours or stop working.
You can maximize your benefits even if you work fewer hours or stop working.
Consider working in your 60s for an extra boost to your income and savings.
Consider working extra years in your 60s for an extra boost to your income and savings
Who Is Entitled To Survivors Benefits From Social Security
How Social Security Can Help You When a Family Member Dies SSA.gov/benefits/survivors
Social Security is a key source of financial security to widowed spouses. About 7.8 million individuals aged 60 and older receive Social Security benefits based, at least in part, on a deceased spouses work record. These surviving spouse beneficiaries are overwhelmingly women.
These beneficiaries include 3.6 million people who are eligible only as widowed spouses. Another 4.2 million who are entitled to benefits based on their own work records but whose deceased spouses benefit amounts were higher than their own, will receive higher benefits as individuals .
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Divorced Know This Significant Exception To The Rule
When planning your Social Security filing strategy, its important to note that you cannot file for a spousal benefit until the higher earning spouse files for their benefit.
But this does not apply if your are filing for a spousal benefit from an ex-spouse.
If your ex-spouse has not applied for retirement benefits you can receive benefits on his or her record if you have been divorced for at least two years and your ex-spouse is at least 62.
Who Can File For Social Security Spousal Benefits
To be eligible for spousal benefits, you must be married, divorced or widowed, and your spouse either is or was eligible for Social Security.
The spouse must be at least 62 years old or have a qualifying child a child who is under age 16 or who receives Social Security disability benefits in his or her care.
Both opposite-sex and same-sex married couples are eligible for Social Security spousal and dependent benefits. So are some individuals in legal relationships such as civil unions and domestic partnerships. And those who were married for at least 10 years and have been divorced for at least two years also can apply.
Spouses can claim benefits based on their own work history or their spouses work history. They will automatically collect whichever amount is larger, but not both.
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