survivor benefits Archives - Page 2 of 3

March 10, 2015 By Liz Weston

Q&A: Social Security survivor benefits

Dear Liz: I earned more than my wife, who died at age 57 after 18 years of marriage. When I turn 60, can I take survivor Social Security benefits based on her work record and then request my benefit at age 70?

Answer: In a word, yes, and doing so may be smart.

Survivor benefits are different from spousal benefits, which inflict some severe penalties for starting checks early. When you start spousal benefits before your own full retirement age, you’re locked into a permanently smaller check and you can’t later switch to your own benefit, even if it’s larger. The only way to preserve the ability to switch is to file a restricted application for just the spousal benefit at your own full retirement age (which is 66 for people born from 1943 to 1954 and gradually increases to age 67 for people born in 1955 and later). Then you preserve the right to change to your own benefit when it maxes out at age 70.
With survivor benefits, starting early means a reduced check — your widower benefit at 60 would be 30% smaller than if you waited until your full retirement age — but you can switch to your own benefit later. And if you don’t work, starting survivor benefits at 60 is the better course, said economist Laurence Kotlikoff, coauthor of “Getting What’s Yours: The Secrets to Maxing Out Social Security.”

“Getting a reduced benefit for 10 years, from 60 to 70, is better than getting an unreduced benefit for fewer years,” Kotlikoff said.
If you work, however, the math becomes less clear. When you start benefits early, your check is reduced $1 for every $2 you earn over a certain limit, which in 2015 is $15,720. That penalty disappears once you hit your full retirement age.

Online calculators can help you determine the best Social Security claiming strategy. AARP and T. Rowe Price are among the sites that provide free calculators, but they don’t factor in survivor benefits. Consider spending about $40 for one of the more sophisticated calculators, such as Kotlikoff’s MaximizeMySocialSecurity.com, that can include this important benefit.

Filed Under: Q&A, Retirement Tagged With: Social Security, spousal benefits, survivor benefits, widow benefits, widower benefits

November 24, 2014 By Liz Weston

Q&A: Social Security and same-sex marriage

Dear Liz: My partner of 30 years recently died. Am I eligible for Social Security survivor benefits? I don’t want anything I don’t deserve, but if I’m entitled to something, every penny would be appreciated. I am 54 and make minimum wage.

Answer: Your eligibility for Social Security benefits as a spouse depends on three factors: whether your state recognizes same-sex marriages, whether it did so on the date your partner died and whether you were legally married. (You wrote “partner” rather than “spouse,” which suggests you may not have been.)

The Supreme Court paved the way for Social Security to offer same-sex benefits when it ruled parts of the federal Defense of Marriage Act unconstitutional last summer. Social Security has taken the position that it must follow state law in recognizing same-sex marriages and that what matters is where the couple live, not where they married. Even in states where same-sex marriage is currently legal, Social Security denies survivor benefits if it wasn’t legal when the spouse died.

If you are eligible, you can start receiving benefits as early as age 60. (Survivor benefits are available at any age if the widow or widower takes care of a child receiving Social Security benefits who is younger than 16 or disabled.)

Starting early reduces your survivor benefit significantly compared with what you would get if you wait until your full retirement age of 67. As a survivor, though, you’re allowed to switch to your own benefit later, if that benefit is larger. (That’s different from spousal benefits, where spouses are precluded from switching to their own benefits if they start getting Social Security checks before their own full retirement age.) If your survivor benefit is likely to be larger than any benefit you’ve earned on your own, though, it typically makes sense to delay starting Social Security as long as possible to maximize what you’ll get.

Filed Under: Q&A, Retirement Tagged With: q&a, same sex marriage, Social Security, survivor benefits

June 23, 2014 By Liz Weston

Q&A: When to start taking Social Security

Dear Liz: You’ve often talked about delaying the start of Social Security benefits to maximize your check. But what about in the case of a widow? My husband died in 2006 at the age of 57. I will be 62 this year and could start receiving benefits based on his earnings. (I did not work during our marriage as I was a home-schooling mom.) I’ve been living off my husband’s modest pension benefits. Would waiting until full retirement age increase the monthly payment I would ultimately get? One of the reasons I ask is that I have an adult son who lives with me and who probably will never be able to have a job. Yet he is not officially disabled and, as far as I know, is not eligible for any kind of benefits. I wondered if it might be a good idea to start taking Social Security as soon as I could and either save or invest the monthly checks to add to what I could leave my son (I have an IRA and other assets I hope not to have to touch). My pension will cease when I die.

Answer: You could have started receiving survivor’s benefits at 60. (Those who are disabled can start survivor’s benefits as early as age 50, or at any age if they’re caring for a minor child or a child who is disabled under Social Security rules.) Since your husband died before he started benefits, your check would be based on what your husband would have received at his full retirement age of 66. If you start benefits before your own full retirement age, however, the survivor’s benefit is permanently reduced.

For many people, starting survivor’s benefits isn’t as bad an idea as starting other benefits early. That’s because survivors can switch to their own work-based benefit any time between age 62 and 70 if that benefit is larger. Starting survivors benefits early can give the survivor’s own work-based benefit a chance to grow.

In your case, however, the survivor’s benefit is all you’re going to get from Social Security. While it may be tempting to take it early and invest it, you’re unlikely to match the return you’d get from simply waiting a few years to start.

Your description of your non-working adult son as “not officially disabled” is a bit baffling. If he has a disability that truly prevents him from working, getting him qualified for government benefits would provide him with income and healthcare that would continue despite whatever happens with you. (You may not want to touch your assets, but that might be necessary if you need long-term care.) If he can work, then getting him launched and self-supporting would be of far greater benefit than hoarding your Social Security checks for him.

Filed Under: Estate planning, Q&A, Retirement Tagged With: Pension, q&a, Social Security, survivor benefits

April 25, 2014 By Liz Weston

Social Security statements make a comeback

Until a few years ago, Social Security sent annual statements to just about everybody who was still working to let them know what they could expect to receive in retirement, survivor and disability benefits (minus a 25% or so haircut if Congress never gets its act together to fix the system). Those statements got axed by budget cuts, but now Congress wants them resumed.

Here’s the scoop from Reuters columnist Mark Miller:

Starting this September, the Social Security Administration (SSA) will resume mailings at five-year intervals to workers who have not signed up to view their statements online, an agency spokesman told Reuters. The statements will be sent to workers at ages 25, 30, 35, 40, 45, 50, 55 and 60, he said, adding the agency would continue to promote use of the online statements.

We won’t be getting these in the Weston household, since we signed up for online accounts. (If you decide to go that route, note that some people have had trouble setting up their Social Security accounts because they have security freezes on their credit reports at Experian, the bureau that Social Security uses to verify identity. Investment News columnist Mary Beth Franklin says you’ll have to unfreeze your report, or visit a Social Security office in person with a government-issued ID to set up an online account.)

Social Security tends to be a pretty vague concept for most people until they start closing in on retirement age–or they’re unlikely enough to need its survivor or disability benefits. But the system contributes half or more of most people’s retirement income, so it’s worth knowing what you’ve been promised. Perhaps knowing might even inspire you to lean on your lawmakers to get the system’s problems fixed while there’s still time.

Filed Under: Liz's Blog Tagged With: disability benefits, Social Security, Social Security Administration, Social Security benefits, survivor benefits

March 13, 2014 By Liz Weston

You may not be as smart as you think you are

Most people are better off delaying the start of their Social Security benefits as long as possible. That’s the consensus of the AARP, financial planners and researchers who have studied the thousands of different claiming options. In fact, the benefits of putting off Social Security have grown in recent years, thanks to low interest rates, gains in longevity and changes in the law since the 1990s.

Still, every time I pass along the advice that waiting is better, I hear from those who just refuse to believe it. They focus on breakeven points rather than longevity risk; they don’t factor in spousal or survivor benefits; they underestimate how much their benefit can grow with even a few years’ delay.

So when Financial Engines approached me with the results of a recent survey, I just nodded my head in recognition. Their poll found that most people nearing retirement are confident that they can make smart Social Security claiming decisions–but that most do poorly on a test that measures their understanding of basic Social Security claiming concepts. You can read more about it in my column this week for Bankrate, “Are you Social Security smart? Guess again.”

My best advice is that before you claim Social Security, use some of the software tools that are available to help you evaluate your options. The AARP has a good calculator here. If you want to play with the numbers and assumptions a bit more, MaximizeMySocialSecurity.com has software that will really let you get your geek on; a one-year license is $40. You also can talk to a fee-only financial planner who is savvy about claiming strategies.

Here are two things you should know:

1. If you’re married (and that includes you same-sex couples, if you file in a state that legally recognizes your marriage), you have unique opportunities to maximize your lifetime benefits and protect your surviving spouse from poverty. The difference between the best claiming strategies and the worst can be $250,000. No, that’s not a typo.

2. Social Security is not going to disappear. The program is simply too popular and its problems, though real, are not insurmountable. Even if Congress does nothing, the system can still pay out 75% of the benefits promised just from the taxes it will collect. If Congress does do something, the changes almost certainly won’t affect near-retirees but will instead change benefits for younger taxpayers. Signing up for benefits as soon as you’re eligible in order to “lock in” your checks will just lock you in to a much lower payment, for life.

If you’re one of those people who likes to dive into the academic research surrounding claiming strategies, here are a few articles to check out:

“Recent Changes in the Gains from Delaying Social Security.” This article in the Journal of Financial Planning demonstrates how changes in interest rates, longevity and the benefit formula have dramatically improved the benefits from delaying Social Security claims.

“How the Social Security Claiming Decision Affects Portfolio Longevity.” Researchers William Meyer and William Reichenstein have done a lot of research on Social Security claiming strategies, and in this Journal of Financial Planning article they use a sophisticated model that factors in taxes to weigh how delaying Social Security can help retirees make their savings last longer.

“Should You Buy an Annuity from Social Security?” This brief from Boston College’s Center for Retirement Research explains why it often makes sense to tap retirement savings so that you can delay the start of Social Security benefits.

“When Should Married Men Claim Social Security?” This article, also from the Center for Retirement Research, should be required reading for any married couple thinking of starting benefits early. It does a great job of summarizing potential spousal and survivor benefits–and of making the point that starting too early can leave your surviving spouse in a world of hurt.

Filed Under: Liz's Blog Tagged With: longevity, longevity insurance, Social Security, Social Security Administration, Social Security benefits, spousal benefits, survivor benefits

February 18, 2014 By Liz Weston

Don’t obsess about Social Security “breakeven”

Dear Liz: I read your recent article in which you advised waiting before starting Social Security benefits. Is this good advice for everyone? You probably know that there is a break-even age around 85, so that if you die before 85, starting benefits early is better, but if you die after 85, starting late is better. “Better” means you receive more money. So, right off the bat the advice to delay is wrong for half the people in their 60s, since about half will die before the crossover, and if they had delayed, they lost money.

Answer: The problem with do-it-yourself financial planning is that people often focus their attention too narrowly and ignore the bigger picture. That’s what leads them to do things like pay down relatively low-rate student loan debt while failing to save for retirement. They may focus only on the expected returns of each option, while ignoring the tax implications, company retirement matches and the extraordinary value of future compounding of returns.

Obsessing about the break-even point — the date when the income from larger, delayed retirement benefits outweighs what you’d get from starting early — is often a mistake, financial planners will tell you. There are a number of other considerations, including the value of Social Security benefits as longevity insurance. If you live longer than you expect, a bigger Social Security check can be enormously helpful later in life when your other assets may be spent. Also, if you have a spouse who may be dependent on your benefit as a survivor, delaying retirement benefits to increase your checks will reduce the blow when she has to live on just one check (yours) instead of two (yours and her spousal benefit).

In his book “Social Security for Dummies,” author Jonathan Peterson offers a guide to figuring out your break-even point based just on the dollars you can expect to receive (rather than on assumed inflation or investment returns). In general, the break-even point is about age 78. That means those who live longer would be better off waiting until full retirement age, currently 66, than if they started early at age 62.

Currently, U.S. men at age 65 can expect to live to nearly 83, and the life expectancy for U.S. women at age 65 is over 85.

You can change that break-even by making assumptions about inflation and your future prowess as an investor, but remember that the increase in benefits you get each year by delaying retirement between age 62 and 66 is about 7%. It’s 8% for delaying between age 66 and age 70, when your benefit maxes out. Those are guaranteed returns, and there’s no “safe return” anywhere close to that in today’s environment.

Don’t forget that those benefits will be further compounded by cost-of-living increases. One researcher published in the Journal of Financial Planning found that an investor would have to achieve a rate of return that exceeds inflation by 5% to justify taking benefits at 62 rather than at full retirement age.

“At higher inflation rates and/or higher marginal tax rates, the rate of return may need to be even higher, perhaps in excess of 7% or 8% above inflation to justify taking benefits at age 62,” wrote Doug Lemons, a certified financial planner who retired from the Social Security Administration after 36 years.

You can read Lemons’ paper, as well as other research that planners have done on maximizing Social Security benefits, at http://www.fpanet.org/journal.

Filed Under: Q&A, Retirement Tagged With: longevity, longevity insurance, Social Security, Social Security Administration, Social Security benefits, spousal benefits, survivor benefits

September 3, 2013 By Liz Weston

Spousal vs. survivor benefits: the key differences

Dear Liz: I am 66 years old. When I was 60, my husband of 42 years died. He was a banker with more than 40 years of work history at a good income level. I remarried a year later. When I was 62, I was downsized and took early Social Security benefits based on my first husband’s earnings record. This amounts to about $2,000 a month. It would have been about $2,500 at full retirement age (66) and about $3,000 at age 70. I was not advised about survivor’s benefits at all or about any variance of survivor’s benefits versus Social Security based on my deceased husband’s earnings. Do you think I would have gotten a bigger benefit amount if I had taken survivor’s benefits at age 62?

Answer: No, because survivor’s benefits are what you’re getting.

Both spousal benefits and survivor’s benefits are based on the earnings record of the other person in a couple (whom we’ll call the “primary earner”). The maximum spousal check is 50% of the primary worker’s benefit. As with other Social Security benefits, the amount you get is permanently discounted if you apply before your own full retirement age.

Spousal benefits are available to current and former spouses, although former spouses must have been married for at least 10 years to the primary earner and must be currently single. (In other words, you can’t have remarried, unless that marriage has ended as well.)

Survivor’s benefits, on the other hand, can be up to 100% of the primary worker’s benefit. Survivor’s benefits based on a deceased spouse’s earnings record are not available to those who remarry before age 60, but can be claimed by those who remarry after that point.

Since the biggest Social Security benefit is around $2,500 a month and you’ve remarried, it’s clear that what you’re getting is the survivor’s benefit, discounted because you applied early.

Filed Under: Q&A, Retirement Tagged With: divorced spouse benefits, Social Security Administration, Social Security benefits, spousal benefits, survivor benefits

Search