Late last year, Congress chose to eliminate one of the more advantageous Social Security claiming strategies. Those changes took effect this year.
I’m talking about the wildly popular “File and Suspend” strategies which paid spousal and dependent benefits while earning delayed retirement credits. Naturally, I’ve spent a lot of time since these changes advising married couples of their alternative strategies for boosting Social Security benefits.
While many widows and widowers have also approached me about these changes, the new laws do not affect them. So, I want to revisit here a few strategies that widows and widowers can employ to maximize their Social Security benefits.
The most important question to ask is whether or not you, as a widow or widower, should first take your own benefit or if you should take the survivor benefit and then switch to your own at age 70.
Here are a couple of points to consider when deciding which route to take…
After reaching full retirement age, you may delay taking your Social Security benefit which would increase your benefit by 8% for each year that you delay, up until the age of 70. In other words, you can receive up to 32% more from Social Security by delaying your benefits.
Any delayed retirement credits earned by the deceased spouse are included in the survivor benefit. The question then is would it make more sense to delay taking your own social benefit, or by delaying the survivor benefit? That’s the question you must answer.
If your own benefit will at age 70 exceed the survivor benefit, you should, in most cases, take the survivor benefit now – transferring to your own after it has grown from delayed retirement credits.
For example, let’s say your survivor benefit is $1,900 per month. You are at full retirement age and are eligible to receive your own Social Security benefit of $2,000. Although you would receive an additional $100 per month today, delaying your own benefit until age 70 would mean that your income would increase to $2,640.
That’s a substantial increase. And in that scenario, it probably would make sense to take the survivor benefit first.
You can claim reduced survivor benefits as early as age 60, or age 50 if disabled. You needn’t wait until reaching full retirement age.
However, strategies are a little more complicated when you’re younger than full retirement age. Should you claim a reduction in your own benefits, or a reduced survivor benefit? Which strategy will earn you more in the long term?
Let’s say Anne is aged 64 years – two years shy of her full retirement age – while her spouse, Tom, passed away at 66. Anne’s full retirement age benefit is $2,000, while her survivor benefit is $1,900. She could accept a reduced benefit of $1,734 now, and then switch to the survivor benefit at her full retirement age.
However, if Anne is in excellent health and expects to live well past her 70s, she might consider accepting a reduced survivor benefit first. While she would receive only $1,647 per month until the age of 70, she could then switch to her own benefit and start receiving $2,640 per month.
As you can see, there’s often more advantage in delaying the greater benefit.
Of course, these are all quite simplified explanations. And as we all know, real life is much more complex than it ever is simple. Any number of additional factors might justify taking one benefit over another.
Furthermore, the Social Security Administration is not allowed to advise citizens of benefits strategies. And because some mistakes cannot be undone, always consult with a trusted retirement income planning professional before executing your retirement strategies.