Americans contribute a significant portion of their lifetime earnings to Social Security in exchange for an inflation protected income stream during retirement. For about half of married couples receiving social security benefits, those benefits represent 50% or more of their income during retirement. So what happens to the surviving spouse when one spouse dies before or while collecting their monthly benefits?
Thankfully, they don't just disappear. The U.S. government has formulated a way to put out benefits to surviving loved ones, even before their own retirement, in the form of Social Security survivor benefits.
Here are three key things to know about these benefits.
1. Who Can Qualify
Spouses: Surviving spouses age 60 or older can claim a reduced survivor's benefits as long as you were married at least 9 months. A surviving spouse of any age is also eligible for survivor benefits if you have a child with the deceased spouse who is under 16 years old or disabled.Children: Most surviving children are eligible to receive a monthly benefit if they're under age 18 (up to 19 if still in high school), or any age if they were disabled before age 22. Stepchildren, grandchildren and step-grandchildren may also be eligible under certain circumstances.
Benefits for surviving children are separate from the spouse's survivor benefits, but the maximum total family benefit is generally capped at between 150% and 180% of the deceased's benefit amount.
Divorced: As a former spouse, you may be entitled to survivor benefits if your marriage lasted at least 10 years, you are unmarried and both you and the deceased ex-spouse are at least 62.
However, these requirements don't apply if you're caring for a child from your former marriage who is under age 16 or disabled. It's also important to note that benefits paid to an ex-spouse will not affect benefits that other survivors could receive.
2. How Much Can You Get?
The amount of your spousal benefit will depend on whether or not you or your spouse had started receiving benefits.
A surviving spouse is entitled to the higher earner's full retirement benefit and may begin drawing benefits starting at age 60 (receiving a reduced benefit amount), or earlier if he or she has a child who is under age 16 or is disabled. A surviving spouse may claim a reduced benefit based on one working record before reaching FRA, then switch to the higher benefit at a later date, allowing for the higher benefit to continue to grow.
For example, Terry and Susan had been married for 20 years when Terry died at age 60. Susan, who is 60 and eligible for survivor's benefits has some options. If Terry was a high earner and Susan is not, it may be smart for her to claim survivor's benefits off of her working record and allow Terry's benefit to grow.
If the surviving spouse is already receiving social security benefits, the death of one spouse will increase the survivor's benefits if the surviving spouse's benefit is lower. For example, Terry and Susan had been married for 20 years when Terry died in a car accident at age 65. Terry was receiving a monthly benefit of $1,950 and Susan, age 66, was receiving a monthly benefit of $1,510. When Susan applies for survivor benefits, her benefit will increase to $1,950.
Survivor Benefits Cash Flow Breakdown
To plan an adequate cash flow, it's crucial to know what percentage of survivor benefits you can get. The percentages breakdown according to the survivor's relationship, age and certain other factors:
- Spouse, FRA or older = 100% of deceased spouse's benefits
- Spouse, age 60 to FRA = 71.5% to 99%
- Disabled spouse, age 50 to 59 = 71.5%
- Spouse, any age, caring for a child under age 16 (or a disabled child of any age) = 75%
- Child under age 18 or disabled = 75%
- One parent (62 or older) = 82.5%
- Two parents (62 or older) = 75% each
If you fit into multiple categories, you will receive the higher of the two benefits.
3. When Should You Claim Benefits?
After the heartbreaking loss of a spouse or parent, applying for survivor benefits might not seem like a top priority. But your loved one wouldn't want to leave financial resources on the table.
Keep in mind that survivor benefits generally start from the time you apply, meaning they're usually not retroactive from the time of your loved one's death. The longer you wait to start the application process, the more money you'll be missing out on.
There's no need to wait for certain documents before applying, as the Social Security Administration can help facilitate this process. For more information regarding Social Security survivor benefits, please visit www.socialsecurity.gov or meet with a financial advisor.
The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual.
This article was originally published on April 10, 2017.
Dustin Smith has expertise in financial literacy and is an Adjunct Professor at Minnesota State University, Mankato. His experience includes creating custom financial strategies at a Fortune 500 financial services company.