Social Security

Dear Liz: My wife is drawing Social Security survivor benefits. Next year I will start drawing my own Social Security benefits at full retirement age. If I were to die, could she switch over to survivor benefits based on my work history? I know she would get a lot more than what she’s getting now, which is why I’m asking.

Answer: Yes, your wife could switch should you die first. If you can afford to wait a bit longer to apply, you would further increase both your own retirement checks and the survivor benefit she could claim. AARP has a free calculator that can help you see how much larger your benefit could be.

For those who are wondering: Survivor benefits for widows and widowers can continue if they remarry at 60 or later. That’s not the case for divorced spousal benefits, which end if the recipient remarries.

Dear Liz: My husband passed away, and I am 59 years old and no longer working. Social Security’s site says that once I turn 60, I can get 71.5% to 99% of what he would have received at his full retirement age. What determines whether I get 71.5% or 99% or something in between?

Answer: The range you mention applies when you start survivor benefits before your own full retirement age for such benefits. For people born in 1962 and later, the full retirement age for survivor benefits is 67.

(This is different from the full retirement age for retirement benefits, which is 67 for people born in 1960 and later. Just in case you thought Social Security benefits weren’t quite complicated enough.)

It also matters if your husband was receiving Social Security benefits when he died. If so, the survivor benefit would be based on that check. If not, the survivor benefit would be based on the amount he would have gotten at his full retirement age (if he died at or before that age) or the benefit he earned (if he died after full retirement age).

In general, though, the earlier you start Social Security benefits, the less you get. If you start survivor benefits at 60, then you’d get 71.5% of your husband’s benefit. If you wait until right before you turn 67, you could get 99%. If you wait until you turn 67, you get 100%.

Your check also could be reduced if you start survivor benefits early and then go back to work. The earnings test would reduce your check by $1 for every $2 you earned over a certain limit, which in 2023 is $21,240. The earnings test would apply until you turned 67.

Something else you should consider is the Social Security benefit you’ve earned based on your own work record. This benefit can continue to grow if you put off claiming it until the amount maxes out at age 70.

You’re also allowed to switch between survivor benefits and your own, or vice versa. (Switching is something that’s not typically allowed with other benefits, such as spousal benefits.)

You could start receiving reduced survivor benefits at 60 and switch to your own maxed-out benefit at 70 — or start your own reduced benefit at 62 and switch to the unreduced survivor benefit at 67, for example. The right course will depend on the amounts involved and the math can be complicated, so consider consulting a financial planner or Social Security claiming strategy sites such as Social Security Solutions or Maximize My Social Security.

Dear Liz: I get conflicting answers on whether my wife, who turns 62 in April, should take her Social Security now. I am 68 and am holding off taking my benefits until 70. Will her survivor benefits include the 8% annual increase I will receive when I start benefits in September 2024? And should she take her benefits now at age 62 (especially since we both plan to retire this year)?

Answer: Your wife’s survivor benefit would include the delayed retirement credits you’re earning by putting off your application. In other words, if you died tomorrow, her survivor check would be about 20% larger because you waited. (That assumes you turned your full retirement age of 66 in September 2020, and have earned about 2.5 years’ worth of 8% annual increases.)

If you make it to 70, she would receive all four years’ worth of 8% annual increases (plus, of course, all the cost-of-living increases your benefit earned in the meantime).

Because your benefit determines the survivor’s benefit, it’s more important for you to delay than for her to put off her application. Still, she most likely will maximize her lifetime benefit by delaying if she can.

The right strategy depends on the details of your financial situation, so consider consulting a fee-only financial planner for personalized advice.

Dear Liz: I have a few simple questions about disability, but have been getting different answers from different advisors. Even the Social Security site has different answers. My wife, a nurse, is 71 and has been working for more than 45 years. She is receiving Social Security benefits, starting when she was 70. She has been working in the office, with little patient contact, for 2½ days weekly for a few years with a salary of just over $50,000. She has progressive neuromuscular pain, with significant pain and discomfort in the right upper leg with radiation. It affects her most when she is sitting, which is how she performs her job. She has seen multiple specialists. She does have various meds for pain, but they cloud her thinking, and she doesn’t want that to affect her work. She is missing more and more time. Is she eligible for disability? If so, can she apply while she is still working, or does she need to have stopped completely? Will her Social Security affect or be affected by her disability? Is there a rough estimate as to the disability payments she may get if she is eligible?

Answer: There is nothing simple about Social Security’s disability benefit program. In general, though, it’s meant to provide a subsistence level of income for people younger than retirement age who can’t work. The average monthly Social Security disability payment is less than $1,500 a month. Benefits are granted only to people who are totally disabled, meaning they can’t work and their condition has lasted or is expected to last at least a year or result in death.

Social Security disability payments aren’t designed to supplement retirement benefits. Once a disabled person reaches their full retirement age, which is currently between 66 and 67, a Social Security disability benefit converts to a retirement benefit, says Christopher Lanfranca, a senior retirement analyst with Social Security Solutions, a claiming strategies site. Someone who applies for disability benefits past full retirement age probably would be given retirement benefits instead.

Adjusting to a $50,000 drop in income could be tough. Consider consulting a fee-only financial planner or accredited financial counselor who can review your financial situation and offer suggestions.

Dear Liz: I applied for and received Social Security widow’s benefits from my deceased ex-husband. Social Security notified me that my ex-husband had a profit-sharing plan that could have beneficiary money. I have tried to find out the correct people to talk to, but the original employer has changed hands a few times. I spoke to the financial services company that handles retirement plans for the current iteration, but they had no record of my ex-husband’s account. Do you have any ideas of people to talk to [in order to] find out if there is a beneficiary for his account?

Answer: Lost retirement accounts are unfortunately a common issue. Financial services company Capitalize estimated in 2021 that 24.3 million 401(k) accounts, with an average balance of $55,400, had been left behind by job changers, with the total rising year after year. Leaving an account with a former employer isn’t a guarantee the money will be forgotten, but it does increase the odds. Most people are better off rolling an old account into a new employer’s plan or an IRA.

There’s no national database for unclaimed retirement accounts, but there are a few places you can look. Companies with employee retirement plans are required to file a Form 5500 annually with the IRS, and these forms have contact information that may be helpful. You can try searching the U.S. Department of Labor’s site for the forms at efast.dol.gov. Another option is creating a free account at FreeErisa, which may help you find older plans. The Department of Labor also has an abandoned plan database at askebsa.dol.gov/AbandonedPlanSearch.

Your next step might be checking the National Registry of Unclaimed Retirement Benefits at unclaimedretirementbenefits.com. This database is run by a company that processes retirement plan distributions. Another place to try is the National Assn. of Unclaimed Property Administrators’ database at unclaimed.org.

Dear Liz: My husband is 75 and started Social Security at 62. I am 68 and started Social Security at my full retirement age of 66. My Social Security benefit is the higher of the two. My financial planner says the rules on survivorship have changed. She believes that if I die first, while my husband can still claim my benefit, it will be reduced since he took benefits early. I have not heard of this before. Is this true?

Answer: No. His early start won’t affect his survivor benefit should you die first, because you were the higher earner. Had he been the higher earner, though, his early start could have penalized you.

It’s the higher earner’s benefit that determines what the survivor gets. When one of you dies, the smaller of your two benefits goes away. The survivor gets the larger of the two checks instead.

Obviously, losing a benefit can mean a significant drop in income. A larger survivor benefit can really help the remaining spouse make ends meet. That’s why it’s so important for the higher earner to delay filing if possible.

Your husband accepted a permanently reduced benefit when he applied for Social Security at 62. You got your full, unreduced benefit by waiting for your full retirement age. If you’d put off your application a bit longer, though, you could have received “delayed retirement credits” that would have boosted your check — and the eventual survivor benefit — by 8% each year until your benefit maxed out at age 70.

Abundant research has shown that most people are better off delaying Social Security if they can. In a November 2022 study for the National Bureau of Economic Research, three economists found that virtually all American workers ages 45 to 62 should wait beyond age 65 to collect and more than 90% should wait till age 70.

One of the three economists, Laurence J. Kotlikoff, has also written a book for the general public about Social Security claiming strategies, “Get What’s Yours: The Secrets to Maxing Out Your Social Security.” Make sure to get the updated version because Congress changed some claiming strategies in 2015 (but not the ones that affect survivor benefits).

You might consider getting a copy for your advisor, or at least sending her a link, because she definitely needs to strengthen her knowledge of this vital program for retirees.