The recent crackdown on Social Security claiming strategies used by married couples left widows and widowers unscathed. Surviving spouses can still mix and match benefits to boost lifetime income by tens of thousands of dollars. While couples don’t often think about boosting the survivor benefit, says Judith Ward, senior financial planner for T. Rowe Price, “it can make a significant difference for whomever the surviving spouse is.”
Keep in mind that delayed retirement credits earned by the first spouse to die are included in the survivor benefit. This is the primary reason experts often suggest that at least the higher earner delay claiming benefits past age 66 to earn those generous 8% a year credits until age 70. The extra 32% that adds to the worker’s benefit will support the survivor as long as he or she lives. If the worker dies before claiming a benefit, any credits earned will boost the survivor benefit (for more, see: How to Calculate the Impact of Working Longer on Your Social Security Benefits).
When the surviving spouse is older than age 70, the claiming regimen is simple. The survivor should switch to a survivor benefit if it’s higher than his or her own. “The bigger of the two amounts lasts until the second spouse’s death,” says Roberta Eckert, vice president of Nationwide Retirement Institute.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
But it’s trickier if the surviving spouse is younger. Then, the question becomes: Would you be better off taking your own benefit or the survivor benefit first, and then switching later on? While the survivor benefit cannot get larger past the surviving spouse’s full retirement age (except for annual cost-of-living adjustments), the widow or widower’s own benefit can grow with delayed retirement credits. “The key is, ‘Can that survivor grow her own benefit to age 70 to exceed her survivor benefit?’” says William Reichenstein, a professor of finance at Baylor University, in Waco, Tex., and a principal of consulting firm Social Security Solutions.
A surviving spouse can claim a reduced survivor benefit as early as age 60 (age 50 if he or she is disabled). Claim a survivor benefit at or beyond your full retirement age and you get 100% of your deceased spouse’s benefit, even if you took your own reduced benefit or a reduced spousal benefit early. (Divorced spouses may qualify for a survivor benefit, too.)
Strategies for a Sixtysomething Spouse
Since your own benefit can earn 8% in delayed retirement credits every year from full retirement age to age 70, the first step for sixtysomething widows and widowers who haven’t claimed a benefit is to see if waiting, say, from age 66 to age 70 to earn a 32% boost pushes their own benefit above the full survivor benefit.
After doing that math, you need to do some strategizing. “The Social Security agent can’t give you advice on what to do,” says Reichenstein. If you simply choose the higher of the two benefits and never look back, you may give up a more lucrative check in the long run.
Let’s say John’s full retirement age benefit is $2,000 and Mary’s is $1,700. John dies at 66, when Mary is also 66, making Mary eligible for a survivor benefit of $2,000. She can file for the survivor benefit now, which at the time of his death is higher than her own. But in four years, when she turns age 70, she should switch to her own benefit. With a 32% boost in delayed retirement credits, her benefit at age 70 will be $2,244 a month—$244 a month more than her survivor benefit.
But age matters, too: Let’s say instead that Mary was only 64 when John died at age 66. In this situation, Mary should consider claiming a reduced benefit right away. But should it be her own reduced benefit or a reduced survivor benefit? Again, that choice hinges on whether Mary’s own benefit with four years of delayed retirement credits would exceed the full survivor benefit that she could take in two years .
Mary would receive about $1,474 a month at age 64 after the 13.3% reduction for claiming her own benefit two years early. At age 66, she could then switch to the full survivor benefit of $2,000.
But she might be better off taking a reduced survivor benefit of $1,810 at age 64. Six years later, she could switch to her own boosted benefit of $2,244 a month for the rest of her life.