NEWSLETTER JANUARY 2016
SOCIAL SECURITY SURVIVORS BENEFITS
One of the benefits of being a member of ElderCounsel and the National Academy of Elder Law Attorneys is that I receive information that not only affects my clients but myself as well . The other night my wife asked me a question about Social Security survivor benefits should I decide to move on to the promised land. Yes, I understand it has a place for lawyers. This information is from an article published in Trusts and Estates Magazine and my ElderCounselor newsletter. I will warn you that while it is informative, it is pretty dry.
According to the Social Security Administration, a surviving spouse may be eligible to receive the deceased spouse’s full retirement benefits, at full retirement age (“FRA”). For survivor benefits only, FRA is 66 for anyone born after 1957, and it increases two months every year until it reaches 67 for those persons born in 1962 or later. For a regular retirement or spousal benefit, FRA is 66 for anyone born before 1955 and increases two months every year until it reaches 67 in 1960.
Simply stated, survivors benefits are determined by looking first at the age of the deceased spouse, and then at the age of the surviving spouse. In other words, we look at the amount of the benefit available to or being a paid to the deceased spouse. Then, we use the age of the surviving spouse to determine if benefits are paid early or at FRA; if the surviving spouse’s benefits are paid before 65, we must apply an actuarial reduction to the deceased spouse’s benefits.
It is important to note a key difference between survivor benefits and spousal benefits. Spousal retirement benefits provide a maximum 50% of the other spouse’s primary insurance amount (PIA). Alternatively, survivors’ benefits are a maximum hundred percent of the deceased spouse’s retirement benefit.
Also, note the difference between the PIA and retirement benefit, which is critical when considering deferred retirement credits (DRCs). DRCs can increase benefits by 8% per year when the worker collects to start collecting after FRA, up to a maximum increase of 32% for deferral to age 70. Note, however, that DRCs apply only for survivor benefits; DRCs do not increase the PIA and thus they aren’t available to spousal benefits. Therefore, if one spouse has the higher personal benefit and waits until age 70 to begin collecting, the full benefit with DRCs would be payable to the surviving spouse.
The most common scenario is when death occurs after both spouses have reached their respective FRA. In this case, the survivor benefit is simply the higher of the two benefits. If one spouse is collecting $2,500 and the other is collecting $2,000, the surviving spouse’s benefit would be $2,500. It does not matter which spouse dies, the survivor benefit is still $2,500.
Now let’s say the wife never worked outside the home. When the husband is age 66, the spousal benefit would be 50%, a $1,000. Note, however, that the spousal benefit would still be $1,000 (not $1,240) when he is age 70 because the 24% increase does not apply to spousal benefits. But DRCs do apply to survivor benefits. So, when the husband dies, the wife would still get the full $2,480 as a survivor benefit.
What if death occurs after age 62 but prior to FRA after taking early retirement benefits? The benefit will be the deceased worker’s reduced retirement benefit. This is one good reason not to retire early. Note that there is a minimum benefit of 82.5% of the deceased worker’s PIA, not including any actuarial reduction in benefits.
If the surviving spouse elects to collect before her own FRA, as with other Social Security retirement benefits there is an actuarial reduction. For a personal, spousal are divorced spouse’s benefit, one can start as early as age 62. However, a surviving spouse can start collecting as early as age 60. If the survivor benefit is at FRA or later, there is no actuarial reduction.
It’s important to note that the surviving spouse has additional options. Suppose the surviving spouse is age 60 and not collecting any benefits. When the other spouse dies, she has the option receiving her actuarially reduced personal benefit, then later switching to a full-unreduced survivor benefit at FRA. This could limit the downside of collecting early.
To determine the monthly reduction amount, simply take 28.5% divided by the number of months between age 60 and the survivor FRA determined above. The”Widow Limit” caps the survivor’s benefit at the larger of the benefit the deceased would have received if he or she were still alive, 82.5% deceased PIA. The Widow Limit only comes into play if the deceased claimed benefits prior to his or her FRA.
A former spouse who is age 60 are older (50-59 if disabled) can get benefits if the marriage lasted at least 10 years. However, there is no age or length of marriage required if the former spouse is caring for his or her natural or adopted child who is younger than 16 or who is disabled and entitled to benefits asked upon your work. Benefits paid to a former spouse who meet age or disability requirement does not affect the benefits for other survivors based upon the worker’s record. However, the benefits paid to a former spouse who is caring for a minor or disabled child to affect other survivor benefits.
Generally, the survivor cannot get survivor’s benefits if he or she remarries before age 60. But remarriage after age 60 (or age 50 with a disability) will not prevent the survivor from getting benefit payments based on the former spouse’s benefits. At age 62 or older, the survivor may get benefits based upon the new spouse’s work, if those benefits would be higher.
Social Security survivor benefits offer a surviving spouse the opportunity to significantly increase her or his benefits based upon the benefits payable to the deceased spouse. Therefore, it’s important that seniors and their loved ones understand how to maximize those benefits. Accessing survivor benefits and understanding what is available is an important piece in helping seniors with their overall planning goals.
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