Most people don’t understand how Social Security works for themselves or their loved ones. Here’s one major misconception: you can’t file early for Social Security and then get an increased level of benefits once you’ve reached Full Retirement Age or FRA. Early filing is one of many common errors, according to a recent article “When You Claim Social Security Can Have Huge Implications for Your Spouse” by Kiplinger. Your lower level is set for life once you’ve started taking benefits before your FRA.
Another standard error happens when married couples don’t understand how their benefits impact each other. If your spouse depends on your Social Security benefits to pay the bills, you need to know how surviving spouse benefits work.
A couple retires, and both decide to take their Social Security benefits right away. One is 66, and the other is 62. The older, Pat, receives $3,000 monthly. The younger spouse, Penny, will receive $1,900. Their total household benefit from Social Security is $4,900. Penny will lose her benefit if Pat dies first and receive only Pat’s $3,000 monthly benefit. Penny may face some serious financial challenges if this is the only income.
If Pat started taking benefits earlier than his FRA, at 64 instead of 66, his monthly benefit would be $2,625. If he started taking benefits at 62, his Social Security benefit would be even smaller. The reductions are permanent, impacting a surviving spouse’s monthly benefit.
What can you do to maximize your spouse’s survivor benefit? Wait for as long as you can to claim your Social Security benefits. Every year you wait, you earn an extra 8% in delayed benefits. These increases grow until age 70 when your Social Security benefit reaches the maximum.
Not everyone can afford to delay their benefits. However, it makes a big difference to the surviving spouse, who is statistically likely to be the female spouse when possible. Waiting is a practical approach for couples who can afford to delay benefits, couples with significant age differences, and couples where one of the two has exceptionally good health or comes from a family with longevity.
Delaying benefits means the loss of benefits during the years until age 70. Forgoing several thousand dollars a month may not be possible for everyone.
If your surviving spouse won’t be able to make ends meet without both Social Security benefits, there needs to be a plan to bridge the gap somehow. How this is done depends upon the individuals and their families. Every situation is different. It is not an easy situation to address. However, one thing is sure: ignoring it will not make the problem go away.
Reference: Kiplinger (April 20, 2022) “When You Claim Social Security Can Have Huge Implications for Your Spouse”