Prior to the passage of the Bipartisan Budget Act of 2015, Social Security benefits were quite generous for married – and even divorced – couples, particularly those with dual incomes.
Spouses could collect benefits based both on their own earnings and their spouse’s earnings. Alas, all good things always come to an end, and the above law did away with this and other valuable perks. Today when you file for Social Security benefits, unless you were born before Jan. 1, 1954, you will only be entitled to the higher of your or your spouse’s benefits, not both.
Fortunately for widows and widowers, the old rules still apply. That means if you and your deceased spouse both earned income, you can collect your own as well as your survivor benefits. But you have to follow the right claiming strategy to do so.
Imagine you are a 60-year-old widow, which means your full retirement age is 66 years and 8 months. We’ll start with the case where your lifetime income was lower than your spouse’s. Suppose you are entitled to $800 per month in Social Security benefits (known as your primary insurance amount, or PIA), while your spouse’s PIA is $2,200 per month. You could apply for your spousal survivor benefit starting at age 60, but this would permanently reduce your monthly benefit to approximately 70 percent of your deceased husband’s PIA, or roughly $1,540 per month.
A better strategy would be to wait until age 62 to apply for your own benefit, then switch to your survivor benefit at full retirement age. Ignoring cost-of-living adjustments, the first approach would provide you with only $369,600 by the time you reach age 80, while the second would generate $30,000 in additional benefits over the same period. And every month afterward for the rest of your life, you’d receive $2,200 under the second approach, 40 percent more than if you had taken the survivor benefit up front.
Let’s now take the same example as above, but with the PIAs reversed (you were the higher-earning spouse with the $2,200 per month PIA and your deceased spouse’s PIA is $800). In this case, the best strategy would be to claim your survivor benefit at age 60 and then switch to your own benefit at age 70. By delaying your own benefit, you would avoid reducing it by taking it earlier than your full retirement age and further increase it by 8 percent per year from your full retirement age to age 70.
The cumulative difference in Social Security income over 20 years with this approach versus starting your own benefit at age 60 would be as high as $96,000.
You don’t qualify for Social Security survivor benefits if you had been married for less than 10 years, or if you had remarried before age 60. But there are situations (such as remarrying after age 60 or having been divorced as well as widowed) that lend themselves to even more creative strategies to maximize future Social Security benefits.
Unfortunately, Social Security Administration agents may not all be trained on the latest rules. Mary Beth Franklin, a nationally recognized expert in Social Security claiming strategies, has reported on situations where Social Security Administration agents denied a widow’s dual-claiming strategy under the mistaken belief that it went away in 2015. (As indicated above, it did disappear for retirement benefits, but not for survivor benefits.)
If you have a financial planner, he or she would probably be your best source for identifying a claiming strategy designed to maximize your Social Security benefits. You owe it to yourself to take advantage of everything the government has to offer.