Interconnecting Rules Affect Social Security Widow’s Benefits

Hi, Gail- My husband, Paul, died earlier this year and I just applied for a widow’s benefit from Social Security. I’m shocked by how little they told me I’d get! In fact, my monthly check would be a lot less than what Paul was receiving. 

Here’s the background: Paul started Social Security three years ago when he was 64. I’m currently 62. I have worked pretty much my entire adult life (except for the 12 years I was a stay-at-home mom) and am still working part-time today. However, since Paul was the higher earner, I figured my benefit based on his earnings would be higher than what I could get on mine. But it’s a lot less than I expected. Does this seem right?

Thanks, Sally

Hi, Sally-

First, please accept my condolences for your loss. Your situation is more complicated than you may think since there are several factors at work here, including the age at which your husband began receiving Social Security benefits, your age and the fact that you are currently working. With the help of Dorothy Clark in the Social Security Press Office, I’ll try to sort this out for you.

Let’s start with the maximum benefit that a widow or widower can receive. This amount is based upon: 1) what the deceased spouse earned over his/her working life, and 2) the age at which he/she began receiving Social Security.

As you probably know, beginning benefits prior to full retirement age (FRA) reduces your monthly check while delaying the onset of benefits past FRA increases it. So the first thing to understand is that because Paul filed for Social Security “early,” i.e. before he was age 66(1), this reduced his monthly benefit.

Since the maximum benefit that can be paid to a widow/widower is 100% of what the deceased spouse was getting prior to his/her death, Paul’s claiming early not only reduced the amount he received while alive, it also reduced the maximum benefit you are entitled to receive as his widow. Unfortunately, many married people don’t realize or consider this. One of the main reasons there are so many elderly women living at or near the poverty level in this country is because their husbands- often the higher earner in the couple- started (reduced) Social Security benefits before FRA and did not consider the impact this would have on their wives who, because of gender and age, would likely out-live them.

By the way, the reverse is also true: if the spouse who is entitled to the higher benefit delays the onset of Social Security, the benefit paid to the widow/widower can be significantly higher. In fact, the longer the higher-benefit spouse can postpone starting Social Security, the larger the benefit the surviving spouse will receive- regardless which partner that is.(2)

According to Clark, since Paul was receiving a reduced retirement benefit, your maximum widow’s benefit is based upon the larger of:

• 100% of what Paul was receiving at the time of his death, or
• 82.5% of his “primary insurance amount” (PIA) at the time of his death

Next, you have to take into account your age. You can file for a widow/widower’s benefit as early as age 60, but this, too, is subject to reduction based upon the fact that you are not full retirement age. For each month prior to age 66- your FRA- your widow’s benefit will be reduced by .396%. (The monthly reduction depends upon the widow/widower’s year of birth.) There’s a good explanation of this on the Social Security website, www.socialsecurity.gov/survivorplan/survivorchartred.htm.

Last but certainly not least, like all Social Security benefits, the amount you receive is subject to an “earnings limit.” If you are earning income from a job (investment income and interest do not count) as well as Social Security and you are not yet full retirement age, some of your benefits may be withheld. This year, for every $2.00 in income that you earn over $15,120, Social Security will withhold $1.00 in benefits. In fact, you could earn so much that your entire benefit is withheld.(3) To understand how earnings impact your benefit, visit this site. Keep in mind that once you reach full retirement age you will receive 100% of your Social Security benefit- no matter how much you earn.

Despite all of the above, as a widow, you can use some strategies that are not available to other Social Security beneficiaries. For instance, let’s say that even though the amount will be reduced because you are not yet FRA and you are receiving income from your job, you decide to take your widow’s benefit now. If you work until age 66 (FRA), you can then switch to the benefit you’re entitled to based on your own work record if that would be higher. This might not be what you planned to do, but it’s worth considering: for each year that you work, Social Security continues to reassess your benefit based upon your most recent earnings. This could result in a bigger benefit than you’re currently entitled to at FRA.

If you need the additional income, another approach to consider is to take your widow’s benefit now and postpone switching to your own benefit even longer. At age 70 it will be at least 32% larger than it would be at age 66. In addition, if you re-marry, you can drop your widow’s benefit at any time and switch to a spousal benefit based upon your new husband if that would result in a bigger check.

I strongly suggest you visit your Social Security office and ask them to run a few different scenarios for you. You can also check out the calculators on the Social Security website here.

Best Wishes, Gail

1. Full retirement age increases to 66 and two months in 2017. Each your thereafter it increases an additional 2 months until it reaches age 67. 2. You don’t want to delay claiming Social Security past age 70. 3. $15,120 only applies if you are not reaching full retirement age (66) at some point this year. If you are, the rule is different. In this case, Social Security will withhold $1.00 for every $3.00 you earn above $40,080 up until the month you reach FRA.