For many people over the age of 60, Social Security is one of the most important sources of income they’ll have in retirement. And for people who have been married, Social Security’s potential can be even greater owing to so-called survivor benefits.
Survivor benefits allow people to substitute the higher benefit of a deceased or former spouse for their own, and they offer other financial advantages as well. But the rules covering survivor benefits are complicated, requiring survivors to familiarize themselves with concepts such as full retirement age, the limit on family benefits (in situations where there is more than one survivor) and so-called blackout or gap periods (the periods, if any, after an eligible child reaches 16 but before a surviving spouse is 60).
Ideally, survivor issues should be discussed by every couple with the explicit goal of creating an overall strategy to ensure the financial security of whichever spouse lives longer. A financial advisor can help you in creating this plan.
Understanding it all, and making the right decisions, would be hard in the best of times. It can be especially difficult if you have recently lost someone close to you and are going through the process of grieving. Statistically, more women than men receive survivor benefits, but everyone should be aware of them as survivor benefits can become relevant no matter your gender or age.
The first thing to do, if you have suffered a loss, is to determine whether you qualify for survivor benefits. Usually, Social Security survivor benefits are available to you if you are 60 or older, were married for at least 10 years, and didn’t remarry before age 60. Others may qualify for Social Security survivor benefits too, including unmarried children younger than age 16 and adult children who become disabled before age 22. Even a parent can receive survivor benefits, provided the parent was getting at least 50% of his or her income from the deceased worker.
If you are among the majority of people approaching survivor benefits as a spouse, you need to decide when and how best to claim benefits. Generally with Social Security, delaying when you first take benefits will lead to a higher monthly payout. For example, though survivors can take benefits as early as age 60, there may be financial advantages to waiting until “full retirement age”—the age when you can receive full benefits, which differs based on when you were born. You can look up your full retirement age for survivor benefits on the Social Security website.
Still, some survivors, for financial reasons, need to start benefits as soon as possible. Also, your own expected lifespan can be a factor in determining when to start benefits. Those who have a family history of long life spans and who are in good health may need to fund a longer retirement than those with serious health issues. For these reasons and others, the decision of when to file for benefits is highly personal. Survivors are encouraged to review their own situation with a trusted and knowledgeable financial advisor. To learn more, see Social Security Benefits: Why Waiting to Claim May be the Right Choice.
Some survivors may be entitled to benefits based on both their deceased spouse’s Social Security benefits and their own earnings. For example, you could choose to file for either a survivor benefit starting at age 60 or your own retirement benefit as soon as age 62, and switch to the benefit of the person with the better earnings record at full retirement age. Note that you cannot claim both survivor benefits and your own worker benefit simultaneously, and that your full retirement age for survivor benefits and worker benefits may be different.
To illustrate the potential strategies available, let’s consider a 60-year-old widow who is eligible for a $2,500 survivor benefit at her full retirement age as well as a $2,000 worker benefit, also at full retirement age. Assuming a 2% annual cost of living adjustment for these benefits, here are projected benefit levels for two possible claiming strategies:
| Begin annual survivor benefits at 60, |
then switch to worker benefits at 70
|Begin annual survivor benefits starting at age 66|
Source: TIAA-CREF projections. Note that actual benefits may vary. Individuals are encouraged to consult the Social Security Administration and their own tax and financial advisors.
In the first example, the spouse who takes survivor benefits at 60 before switching to taking her own worker benefits at 70 was able to receive Social Security benefits sooner than in the example of the spouse taking survivor benefits at age 66. Also, by taking a reduced survivor benefit at 60 and delaying her own worker benefit until age 70 she receives a total of $314,440 over the twelve years illustrated vs. $213,120 from the option of taking her un-reduced survivor benefit only at age 66. Additionally she will receive a greater worker benefit going forward.
However, the strategy of staging benefits—that is, of beginning to take the lower benefit as soon as you become eligible and switching to the higher benefit at full retirement age–may not always be optimal. For instance, if you are younger than full retirement age, still working and are earning more than $15,720 a year,1 the Social Security Administration will reduce your benefits by $1 for every $2 you earn. There are other factors, too, that affect the optimal way to structure benefits. You have to understand the rules, do the math and see what makes sense for your situation.
Survivors can gather information in several ways. The Social Security Administration offers an excellent page of online information for survivors , and it also has local offices and call centers. The agency’s personnel can help you figure out if you qualify for survivor benefits, and can provide basic information about how the benefits work. You should keep in mind, though, that it isn’t Social Security’s responsibility to advise you on the best way to use the benefits that are available to you. Those decisions depend on your personal situation—including your age, income level, work status, and health. At what is usually a difficult time, it may be best to make your decisions with the help of a TIAA-CREF financial advisor.
1 This is the amount of income that’s exempt in 2015. Social Security increases the amount most years.
The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons.
The statements made in this presentation represent TIAA-CREF's interpretation of applicable law. It is presented with the understanding that TIAA-CREF (or its affiliates, distributors, employees, representatives and/or insurance agents) is not engaged in rendering legal or tax advice.
Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor.
TIAA-CREF Individual & Institutional Services, LLC, Teachers Personal Investors Services, Inc., and Nuveen Securities, LLC, Members FINRA and SIPC, distribute securities products.
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