Hello, and welcome back to Powering Your Retirement Radio. This week I will answer a question on spousal benefits from Social Security. I received a call from someone making sure their parent received the correct amount from Social Security.
I will define a few terms and then wrap them all together to answer the question.
Social Security Benefits
There are many types of benefits you can collect from Social Security. Spousal Benefits are the most common. Divorced spouse benefits and widow or widower benefits are common, too. Of course, there is always your own earnings record to collect on, as well.
Spousal benefits are not as common as they used to be, but they are still pretty prevalent. Spousal benefits allow a lower-wage-earning spouse to collect on their spouse’s benefit, which is why they are called spousal benefits.
A spousal benefit collected on your spouse’s earnings record at full retirement age is ½ of your spouse’s primary insurance amount. If you collect at 62, the benefit is reduced, similar to your benefits if you collect early. Since the maximum spouse benefits start at 50%, the reduced benefit can be as little as 32.5% of your spouse’s full benefit amount.
A widow/widower’s benefit can start at age 60, two years earlier than if your spouse is still alive. The benefit pays more than a spousal benefit since it is a survivor’s benefit. The reduction for claiming a widow/widower’s benefit at age 60 is 70.5% of the full retirement age benefit.
Survivor benefits are paid to a living spouse if the living spouse has the lower of the two Social Security benefits. Social Security will not send two checks to a house where one person now lives. However, they will continue to send the larger of the two checks. Technical note: If you are the lower-wage earner, you will still receive your benefits. The survivor benefit is considered the difference between the two checks. You would only receive one check, so it doesn’t make a difference.
How do I know if my parent is getting the correct benefit? First, you must start with what your parent is entitled to collect. Here is the situation: parents divorced before retirement but after a longer than ten-year marriage. One spouse then passed away. So what is the survivor entitled to collect?
You need some basic information. First, did both spouses have enough of a work history to qualify for their benefits? Meaning, did they have 40 quarters of employment? Yes, so they both had their own earnings record.
Next, we had to determine who had the better earnings record. Of course, the spousal benefit is not essential if the surviving spouse has a better earnings history. But, on the other hand, if they were the lower-wage earner, the spousal benefit might have been worth more than their benefit.
The key with your benefit or a spousal benefit is you can only collect on one, and it will always be the larger of the two. You used to be able to choose one and let the other grow. The change several years ago changed that. It is called deemed filing. Deemed filing means if you file, you are considered to have filed for all of your possible benefits, and you get the most significant payment.
Of course, it is not that easy. Widow/Widower benefits are calculated separately from your Spousal Benefit and your benefit. You can collect on a Widow/Widower benefit at age 60. It would be reduced, but collecting on the benefit does not affect the growth of your own or your spousal benefit if that would be more.
Suppose your benefit and your deceased spouse’s benefit are close in value. In that case, you could collect your widow/widower’s benefit at 60, letting your benefit grow. At some point down the road, your benefit may become more significant. You can choose to switch over then or let it continue to grow and switch over later, and it is worth even more.
Social Security help
Social Security agents should be aware of your previous marriages because of tax filings. However, I would not always assume they know of a deceased former spouse. It should be connected to your record, but be proactive when speaking to a Social Security agent since you can collect on it separately. Also, if you remarry after the age of 60, you are still entitled to Widow/Widower benefits.
In the end, I left my client with a list of things to check on when they spoke with Social Security:
If it becomes more significant, can you live on the other benefit today and get the other benefit later?
When you consider you can claim several different benefits every month from 62 to 70, the multitude of benefits is staggering. You must ensure you understand what is available and get some help understanding your options. A Social Security agent will not give you advice, only information.
Suppose you are facing a Social Security decision shortly. In that case, you can always drop me an email or leave a question on the podcast website. I’d be happy to have a conversation with you.