How Do Social Security Survivor Benefits Work


Greenbush Financial Group & Money Smart Board


social security,survivor benefit,social security survivor benefit,widow benefit,how much social security does a wife receive,divorce,ex-spouse,earned income penalty,filing strategy,age 60,when can i file,taking the benefit early,delaying the benefit,age 70,financial planning,husband,wife,Michael Ruger,Greenbush Financial Group,Money Smart Board

[Music] hi I'm Micah Ruger I'm the managing partner greenwash Financial Group today we're going to be going over Social Security survivor benefit for spouses which is a super important topic because for a lot of couples in retirement Social Security is a really big piece of their monthly income and when one spouse passes away potentially losing one of those Social Security checks can put that surviving spouse in a really tough financial situation so today we're going to be going over who's eligible for those survivor benefits as a spouse I'm going to go over how those benefits are calculated so you know it you're going to receive from Social Security after your spouse passes away also we as planners employ advanced strategies for filing for Social Security so the surviving spouses get the most out of the system when we're coordinating both their survivor benefit and their personal benefit so I'm going to share with you some of those strategies also there's always that back and forth over do I get Social Security early do I wait til normal time and age do I delay until late 70 we're gonna go over all those pieces and also for younger spouses that are maybe in their early 60s like we're gonna also talk about the Social Security Earned Income penalty that exists for people that take Social Security prior to normal retirement age and you have to watch out because it could be a penalty waiting for you at the end of the year because you made too much there's also going to be a section on clients that are divorced or individuals that are divorced even though you are no longer their spouse you may still be entitled to a survivor benefit when they pass away and the final piece we'll talk about is for couples that are planning for retirement that have yet not yet filed for Social Security I'm going to tile this into you know how you really preserve these survivor benefits from Social Security for your spouse we'll start off by just going right after the most important question which is when your spouse passes away how will your Social Security benefit change and what is the amount of that Social Security benefit that you will receive going forward now the way Social Security works is when a spouse passes away the surviving spouse just gets the higher of the two benefits you don't get to keep collecting both benefits simultaneously so the best way can do this as an example so let's say we have Jim and Jim's 80 years old and he's married to Sarah Jim's receiving $2,500 per month in Social Security and Sarah is getting 2,000 per month now let's say Jim passes away when Jim passes away since he had the higher benefit Sarah will now start receiving $2,500 per month but then her $2,000 per month benefit stops so she doesn't get to keep collecting both if we switch things around now let's say Sarah passes away before Jim Jim just continues to receive his $2,500 because he was already getting the higher the two and then Sarah just ends but you can see where you are losing income so in either scenario prior to the one spouse passing away they were getting $4,500 per month where as soon as one of the spouse passes that gets to reduce that $2,500 survivor benefit that's available to either one of them so there is one requirement to make you eligible for that spousal benefit through Social Security and that is the marriage had to have lasts for at least nine months leading up to your spouse passing away if the marriage was shorter than that leading up to their date of death you are not eligible to receive the survivor benefit through Social Security so before I get into discussing the advanced strategies that we use for surviving spouses with Social Security I first have to lay some groundwork as far as how Social Security filing works under normal conditions based on your age whether you take it early delay it take it at normal time and age so the way Social Security works is we all have a normal retirement age in the eyes of Social Security and it's really based on your date of birth so here's a chart that kind of shows you the ranges of date of birth and normal time and ages so essentially if you are born 1960 or later your normal terminate for Social Security is 67 if you were born earlier than that then you can kind of see different variations in the chart whether sixty six or sixty six and six months now the important part and the reason why this no retirement age comes into play is when we're talking about your personal Social Security benefit you can elect to take your benefit as early as age 62 however if you take your Social Security benefit prior to your normal terminates the way the formula works is they reduce your Social Security amount that you receive by approximately about 6% per year so if you take it at 62 the way the math works out you only receive about 70 percent of your promised benefit and that's a permanent reduction for the rest of your life vice versa if you decide to delay your Social Security benefit past your normal time and age your benefit actually goes up by 8 percent per year until age 70 and then that's where it caps out so let me tie this in real quick to how we use this information to proactively plan for couples that are approaching retirement that have yet to file for Social Security because this survivor benefit consideration definitely comes into play so it's not uncommon for two spouses to have different Social Security benefits because they have different earnings history and the spouse with the higher earnings history typically we will recommend that they delayed their Social Security benefit as long as possible because we want to make their monthly benefit as large as possible because remember with the survivor benefit you get the higher the to one of them is going to drop off so by having that higher income earning spouse wait till almost like let's say 70 to get the highest benefit they possibly can if that higher income earning spouse passes away first the lower income earning spouse is going to bump up to they're much higher amount and then they lose their benefit but we've created some cushion there and vice versa if that higher income earning spouse lives longer they're going to lose that lower income earning spouses benefit but they're holding on to a higher amount so it's just a way to kind of preserve more retirement assets if we know we have a bigger safety net by creating that larger survivor benefit retirement with surviving spouse benefits you also have the ability to access those Social Security payments as early as age 60 which is different that we talked about before because with your own personal Social Security benefits the earliest you can take it is 62 now similar to taking it early they will reduce that benefit by 6% per year from your normal time and age but just know you can take it slightly earlier and it's based on your spouse's earnings history now here's where the advance filing strategy comes into play and this is where sometimes we will have those surviving spouses turn on that surviving benefit earlier than they normally would mainly because Social Security looks at the surviving spouse benefit and your own benefits separately which means you can turn on your surviving spouse benefit at 62 reduced amount and allow your benefit based on your earnings history to continue to grow even though you're getting Social Security payments as a survivor from the system which means if let's say as a surviving spouse I'm getting $1,000 per month starting at age 60 my personal benefit gets to grow every single year and if I wait until age 70 to turn it on and then it's $2,500 at age 70 I can switch from the survivor benefit over to my higher benefit and then it's that payment going forward even with this strategy you do have to be aware of the Social Security Earned Income penalty so Social Security has a special rule that says if you take Social Security benefits as a survivor or your own benefits prior to no more time and age if you earn over a certain threshold and income during that year they penalize your Social Security benefits which means they take some of that money back and in 2020 that threshold is around $18,000 per year so the way it works is if I'm getting Social Security benefits early and I earn over $18,000 per year they start to take $1 my Social Security benefits for every $2 I earn over that $18,000 threshold so kind of the rule of thumb is in the Social Security world as if I'm planning on continuing to work and I'm going to make income that's substantially larger than $18,000 per year it may not make sense for me to file early in either case because I'm going to get the money from Social Security and then essentially they're just gonna take it back and that Earned Income penalty the good news is once you hit your normal term and age that Earned Income penalty goes away so if my normal retirement age is 67 as soon as I turn 67 what are whether I'm turning on that survivor benefit or my own Social Security benefit I can make as much as I want earned income wise and they're not going to try and pull back some of that benefit I'm receiving from Social Security now I do want to touch on divorced couples because not a lot of divorced couples realize that even though you weren't married at the time your ex spouse passed away you actually may still be entitled to the survivor benefit if you meet certain conditions so those conditions are if the marriage lasted more than ten years and you did not get remarried prior to age 60 when your ex passes away if their Social Security benefit was higher than yours you can actually go into the Social Security office say I want to elect my survivor benefit and you will bump up to that higher amount even if your ex spouse got remarried and was married at the time he passed away you are still entitled to that survivor benefit and his current spouse is also entitled to that survivor benefit but it doesn't reduce either benefit both the current spouse and the ex spouse can both receive a hundred percent of that survivor benefit and there was actually extreme case where a gentleman had been divorced twice both marriages lasted ten years and he actually was remarried to wife number three when he passed away when he passed both ex-spouses and the current spouse were all able to elect the survivor benefit at those hundred percent amounts if you have any questions on the social security topics that we talked about today feel free to reach out to us at money smart board com thank you [Music] you