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Social Security

Oct 16

Social Security Provides Benefits for Older Widows Too

By Cash Flow Planning, Financial Planning, Social Security, Widows and Money

Widows 60 or older (50 if disabled) are entitled to receive survivors’ benefits from Social Security based on their late husband’s work record. This includes divorced women whose ex-husbands have died if they were married to the deceased for 10+ years and did not remarry before the age of 60.

These widows receive 71.5% – 100% of what their late husband would have collected at his full retirement age (“FRA”), which is 66 plus some number of months for those born 1945-1959, and 67 for those born in 1960 and later. The exact percentage of their late husband’s benefit that they will receive as widows depends on the widow’s age and how close she is to her own full retirement age. If she has reached her own FRA, she’ll receive 100% of what her late husband would have received at his FRA. The further away she is from her own FRA, the lower the percentage.

What could this mean, in dollar terms?

Currently, the average Social Security benefit is $1,461 per month, while the maximum benefit for someone who’s reached his FRA is $2,861. Thus a widow could receive something in the range of $1,045 to $2,861 per month in survivors’ benefits. This can provide valuable support while a widow is in transition.

That said, there are a couple of things to think about.

First, for women who work and who have not reached their own FRA(1), these widow’s benefits will be taxed at $1 for every $2 of income they earns above $17,640 (2019). For those who have reached their FRA, their widow’s benefits will not be reduced by any income earned from work.

Second, collecting survivors’ benefits will not impact the retirement benefits a woman can claim on her own work record or that of her late husband.

Third, once she is 62 and can collect her own retirement benefit, a woman cannot collect both a survivor’s benefit and a retirement benefit. Social Security will pay only one benefit, and will pay whichever is the higher of the two.

It’s important for widows to file for survivors’ benefits as soon as possible. The Social Security Administration will pay claims retroactively to the date of the filing, but not the date of death.

(1)66 plus some number of months for those born 1995-1959, and 67 for those born in 1960 and later

Oct 12

Social Security “Survivors Benefits” for Widows and Children

By Cash Flow Planning, Financial Planning, Social Security, Widows and Money

Did you know that Social Security provides “survivor benefits” to widows and their children?

Widows can receive benefits, for themselves, if they are caring for a child under 16 or a child of any age who is permanently disabled. Each child under 18(1) can also receive a monthly check for him/herself, payable to the parent. The benefits paid to the widow and her child will each be equal to 75% of what the deceased father would have received at 67, his full retirement age (“FRA”).(2)

So, what could this look like, in dollar terms?

Currently, the average Social Security benefit is $1,461 per month, while the maximum benefit for someone who’s reached his FRA is $2,861. Thus a widow and her child could together receive something in the range of $2,100 to $4,300 per month in survivors’ benefits.

There are some limitations, however.

For widows who work outside of the home, their own widow’s benefit will be reduced by $1 for every $2 earned above $17,640 annually (2019). Since most women earn well above this threshold, the value of the widow’s own benefit is quickly lost.

That said, no matter a widow’s income, filing for the children’s benefit is a no-brainer. It’s found money. These benefits will continue for each child until s/he reaches 18(1) and will rarely be taxed.(3)

There is a maximum benefit that a family can receive, meaning that your combined benefit, widow’s plus children, is capped at 150-180% of the benefit the deceased father would have received at his FRA.

It’s important for widows to know that collecting survivors benefits now will not impact the amount you will ultimately collect in retirement benefits down the road – whether you plan to collect those retirement benefits on your deceased spouse’s earnings record or your own.

Widows must file for benefits in person at their local Social Security Administration office and should do so soon after their husband’s death. Once the application is processed, the Social Security Administration will pay benefits retroactive to the date the application was filed, not to the date of their husband’s death.

Social Security survivors benefits will not likely replace 100% of a late husband’s income, but they can provide valuable support in a widows transition.

(1)Or up 19 years, 2 months if still in high school full time

(2)67 for those born in 1960 or later

(3)The children’s benefits are only taxed if the children themselves have significant income – about $25k – from other sources

Oct 02

How Social Security Works

By Financial Planning, Retirement, Social Security

We’ve been paying into Social Security from the time we earned our first paychecks as teens or twentysomethings. But what can we expect to get back when we retire ten, fifteen or twenty years from now?

“Nothing!” you cry.

Yeah, yeah, the system needs fixing to stay solvent, but I’m confident that the politicians will come up with a solution for two reasons. Seniors care about Social Security. And seniors always vote.

Right now, the government collects 12.4% of the first $132,900 of our income with half (6.2%) coming out of our paychecks and the other half coming from the employer. (The self-employed pay both halves, but can deduct the “employer half” from their income to level the field with corporate employees.) Because the amount of our income that is taxed for Social Security is limited, the amount of Social Security benefits we can receive in retirement is capped.

The exact amount you or I will receive in retirement depends on two factors. The first is our individual earning history. Social Security will use a worker’s highest 35 years of earnings to calculate the amount she receives monthly in retirement. The second is at what age we elect to collect benefits. For those of us born in 1960 or later, we will receive 100% of what we have earned, from Social Security, if we collect benefits at age 67 – our “Full Retirement Age” or FRA. We can elect to receive benefits as early as 62, but our benefits will be reduced.

Collecting at age… Benefits reduced by…
62 30%
63 25%
64 20%
65 13%
66 7%

We can also delay collecting Social Security benefits past 67 and receive more in monthly benefits as a result.

Collecting at age… Benefits raised by…
68 8%
69 16%
70 24%

For many of us, our earnings history will be what it will be. Years when we stayed out of the official workforce to raise children or take care of aging parents will get factored in as zero earnings years and reduce our ultimate Social Security benefits. Decisions about when to start collecting benefits on our own work record or that of a spouse are complex and deserve careful consideration. Delaying claiming will let your ultimate Social Security benefit grow, yes, but if you are relying on savings to pay the bills until claiming, you may be putting your financial security in retirement at too much risk. This is where a CFP® professional can help guide you towards the right decision.