Social Security Benefits Available to Widow(er)s

The loss of a spouse is emotionally and financially devastating.

If you've recently lost a spouse, it's important to gain control of your financial footing again after the grieving process.

And with a little bit of knowledge and thoughtful planning, Social Security survivor benefits may be able to provide you with some financial relief for years to come...

Hello everyone, I'm your host, Cameron Valadez, Certified Financial Planner.

Today, I want to discuss survivor benefits that may be available to you and possibly some other family members from social security after the loss of a beloved spouse.

Now, I will warn you upfront that I will be going over many different rules and exceptions in today's episode.

Social security does not make this easy.

So use this episode to reference back to as you're likely not going to remember everything.

I will provide some chapter markers in the episode show notes of the different topics, so it's easier to reference back to whatever you wanna look up.

Now, as a new widow or widower, you will very likely be taking the time to grieve and mourn, which will be your own unique and very personal journey.

And diving into making financial decisions quickly typically isn't a great idea because you are susceptible to making many mistakes and regretful decisions.

However, when it comes to Social Security survivor benefits, you should prioritize looking into eligibility as soon as possible so you don't miss out on any potential income replacement.

As the surviving spouse, you will now obviously need to manage your ongoing household and living expenses alone.

And if your spouse passed prematurely, you may even be responsible for young children.

Regardless, the average age of widowhood, according to the US Census Bureau, is 59, which shows that the average widow or widower may need 20 to 30 years of sufficient income to support their lifestyle without any additional income from a spouse.

However, in addition to your other income sources, Social Security may provide you some relief depending on your exact situation.

If eligible, Social Security provides what are called survivor benefits to surviving spouses, children, dependent parents, and even divorced widows and widowers, believe it or not.

And although it isn't much, Social Security will even pay an additional one-time payment to a spouse or child of a whopping $225 if the deceased worked long enough.

I'm not sure why they chose that amount, all I know is some people find it almost offensive, but hey, it's something.

As a widow or widower, how do you become eligible for these survivor benefits, and how is the benefit amount determined?

In general, if the deceased spouse had 40 credits, otherwise known as 10 years of work where they paid into social security, they are fully insured.

However, if they didn't have 10 years of paying in, but they worked for just 1.

5 years during the 3 years before they passed, some benefits still may be payable to their dependents.

Another metric to qualify for survivor benefits is that you must have been married to your spouse for at least 9 months.

This is opposed to divorce situations where one of the requirements is that you had to have been married for 10 years to collect survivor benefits based on an ex-spouse.

If you'd like to learn more about those rules as far as divorce goes, check out our previous podcast episode which I will link to in today's show notes.

To be eligible to receive these survivor benefits, you must also remain unmarried until at least age 60.

This is a really important one that slips through the cracks all the time.

Otherwise, if you remarry before age 60, you give up this survivor benefit.

Now, after age 60, you are free to remarry if you'd like, and you can collect the higher of your survivor benefit from your first spouse, your own retirement benefit, or a potential spousal benefit from your new spouse.

However, you cannot collect on all of them.

If your new marriage ends, you can become re-eligible for survivor benefits based on the first marriage.

The minimum age you can begin receiving a survivor benefit is also age 60, or 50 if disabled.

I want to mention, just because you are generally eligible as early as age 60, that doesn't mean that's when you should begin taking these benefits.

This is really going to depend on your specific circumstances.

There are many other factors that will come into play, which I will get into shortly.

Also, as a surviving spouse, you can receive survivor benefits at any age if you are caring for the deceased's child who is currently under age 16 or has a disability.

If you qualify because you have a "child in care," there are no length of marriage requirements, so the 9-month rule is essentially a moot point.

So if you're under age 60, you may be able to collect a child in care benefit up to a max amount of 75% of the deceased's primary insurance amount, or PIA.

The PIA is generally the amount they would have received each month if they filed at their full retirement age.

Again, you must be caring for the deceased's own child who is under age 16 or disabled before the age of 22.

The child can be a legally adopted child or even a stepchild, but if a stepchild, they must have been the deceased's stepchild for at least 9 months prior to death.

If your ex-spouse passed and you're taking care of their child, you may also qualify to receive these benefits if you're still unmarried.

Okay, so those are the rules and guidelines to determine whether or not you're eligible to receive a survivor benefit.

Now let's look at how the amount of the benefit is determined.

The amount in survivor benefits you may receive is based on the benefit your deceased spouse was already receiving, or if they died before claiming, it's based on the greater of their expected full retirement age benefit or what they would have been entitled to at death.

For example, maybe they didn't start collecting their benefit at their full retirement age between age 66 and 67, and they were currently receiving retirement credits by delaying before passing at age 68.

In that case, you would receive the larger amount they would have got had they started their own benefits at age 68.

In addition, like I hinted at a moment ago, the amount will also be based on the age in which you apply for the benefit.

Remember, The earliest age is age 60, in general, unless you are disabled or caring for the deceased child under age 16.

However, taking it as early as possible will result in a permanently reduced benefit.

More specifically, if you take it at age 60, you will only receive 71.

5% of the full benefit amount.

You will get the full benefit you're entitled to only if you wait until your own full retirement age.

help you out, I will include a link for you to look up what yours is in the show notes for today's episode.

Another important factor to consider before applying is whether or not you will be entitled to your own retirement benefit and how much that may be.

This is because you are able to start with one benefit, then switch to the other later.

For example, you could start your survivor benefit first at age 60, then switch to your own potentially higher retirement benefit later at age 70 in order to allow your own retirement benefit to accumulate those additional credits, for example.

This is where some financial planning can be extremely beneficial.

So what are some other complications that can affect the benefit you may receive?

Well, for starters, Social Security imposes what's called an "earnings limit" on the amount that you are able to earn from work, whether it be as an employee or a small business owner before reducing or completely eliminating a retirement or survivor benefit you might begin receiving before your own full retirement age.

For instance, if you are a surviving caregiver and you earn more than $21,240 in 2023, your benefits may be reduced or not payable at all, depending on how much excess income is earned over that threshold and the amount of your survivor benefit.

If, however, you're still working at or beyond your full retirement age and then you begin retirement or survivor benefits, then there's no reduction and you don't need to worry about this at all.

Now that's the bad news.

The good news is that working after the death of a spouse not only will potentially increase your own eventual Social Security retirement benefit, but also place less of a strain on other assets that may be needed to be used early at the risk of depleting them for retirement, which may be years down the road.

Another complication that may affect your benefits is called the Government Pension Offset, or GPO for short.

This applies to survivors who receive a pension from a government-related entity where you did not pay into social security.

Some examples could be some of the Federal civil service, state pensions like CalPERS or CalSTRS in California, and some local government employment or work in a foreign country.

Military pensions, however, do not affect social security benefits.

If this is the case, social security may reduce or eliminate the benefits you would otherwise receive by a maximum of two-thirds of the amount of that government pension.

So now that we know how eligibility works and how benefits are determined and how they can be affected, let's look at how some other family members might become eligible for their own survivor benefits.

As long as the deceased is currently or fully insured, a surviving child may also receive their own benefits if they meet the following parameters.

They are younger than age 18 or up to age 19 if they are a full-time student in an elementary or secondary school.

They are age 18 or older with a disability that began before the age of 22.

Last but not least, they are an unmarried child of the deceased.

These potential benefits are capped at 75% of the deceased spouse's full retirement age benefit or PIA.

Other than children of the deceased, parents of the deceased that were being cared for may also be eligible for a survivor benefit.

To be eligible, they must be at least age 62 or older and were a dependent of the deceased for tax purposes who also provided at least half of their support.

Now I want to share with you a very unique situation when multiple dependents are payable under one record.

So this could be a parent or child or multiple children, whatever the mix is.

When this happens, what is called the Social Security Family Maximum may effectively remove the impact of the earnings penalty for widows and widowers that were still working and under full retirement age.

This is because the same amount may be payable whether there are two dependents or three dependents collecting benefits under the family maximum, thereby allowing the surviving spouse to earn substantial amounts without reducing their overall social security benefits.

Now I know that sounds confusing, so here's an example to break it down.

Sarah, age 38, has 2 children, ages 6 and 8.

If Sarah has no earned income, the calculated family maximum total payment from social security under her recently deceased spouse's record is $2,100 a month, based on his full retirement age benefit, otherwise known as PIA, of $1,400 a month.

Without the family maximum, Sarah and her children could each collect $1,050 a month, which again is 75% of his primary insurance amount, or PIA.

However, the family max provision brings down the total payment between all three of them to $2,100 a month, or in other words, $700 a month to each surviving family member.

Now, let's say Sarah gets a full-time job so she will have too much income to collect a social security benefit before her full retirement age.

However, without Sarah in the mix, the maximum family benefit remains at $2,100 a month, her two children will be entitled to $1,050 a piece, which equals that $2,100 maximum.

Essentially, in this scenario, Sarah is failing the annual earnings test because she's working and earns too much money, but it will not reduce the total family payment from Social Security.

Now, I share this example with you because it goes to show how important it is to understand, at least at a basic level how social security works and especially survivor benefits and some of these nuances.

And the main reason is because when you reach out to social security, they are not going to give you specific financial advice.

They're not going to tell you whether or not it makes sense for you to take a certain benefit now versus later or one before the other.

They're not gonna tell you that, hey, if you stop working, you can receive this benefit and you can live off some of the other assets that you have.

they're not going to do any of that.

So you wanna have this basic level of understanding.

Not only that, but there's actually a whole host of other things you wanna consider before reaching out to them.

So I have a little checklist here that you can walk through to make sure it actually makes sense for you to apply at the moment and better prepare yourself to be able to quickly provide them with the information that they will ask from you.

So number one is to have a certified copy of the death certificate of your deceased spouse.

Number two is find birth certificates for any dependents that you might have.

Number three, if you're an ex-spouse and caring for the deceased child, find the marriage certificate as well as the divorce decree.

Four, find your most recently completed tax return and or the deceased spouse's recent W-2.

Five, your and your spouse's social security numbers.

Six, the bank information for the account you would like any future benefit payments to be sent to.

Seven, remember that a remarriage before age 60 will generally disqualify you from survivor benefits.

Eight, consider doing some future cashflow planning if you have dependent children that will eventually age out and therefore the benefits for them will cease.

You don't wanna be caught by surprise when all of a sudden some of your benefit payments you're living off of go away.

Nine, weigh whether or not you should continue to work or return to work to replace lost income versus claiming a child in care benefit.

10, be mindful of how your earnings prior to your own full retirement age will affect your benefits.

11, determine whether or not filing for your own retirement benefits, if you're eligible, before filing for survivor benefits is more beneficial for you or vice versa.

Maybe it makes sense to take the survivor benefits first and delay your own full retirement benefit.

12, and while social security won't ask for this, I wanted to make sure that you were aware.

Make note of any retirement accounts, such as IRAs or 401ks that the deceased may have had.

This will be helpful when doing some of your financial planning to determine how these can work together with the timing of your social security benefits and other strategies that you may be able to utilize.

13, piggybacking off of that, know that the year of death will typically be the last year you will be able to file married filing joint.

meaning that in future years, your taxes will very likely increase.

The exception to this is that in the two years following death, you can actually file as a qualified widow or widower if you have a dependent child, which is similar to filing joint.

Last but not least, know that you cannot apply online for a survivor's benefit.

You must do so by filing an application by phone or in person at a local social security office.

Recognize that making the decision to collect survivor benefits isn't an easy black and white answer simply because you can.

For most widows and widowers, there are many other considerations to account for such as family dynamics, other assets that you may have, your own retirement benefits through social security, and your age.

Conducting some financial or cashflow planning and assessing all of your options first can make the difference in tens of thousands, if not hundreds of thousands over the rest of your lifetime.

And if you are overwhelmed or confused, don't be afraid to lean on loved ones and those who have been through similar situations before or consult professionals for help.

That does it for today's episode.

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