Calculating Survivor Benefit

JonathanH594812 · ‎05-05-2020

Husband starts collecting SS at age 70. Wife starts collecting at age 62 based on her own work record. Husband dies when wife is at full retirement age. Wife’s survivor benefit will be more than what she receives on her own record. Does she receive full amount of husband’s benefit or is is reduced because she started collecting on her own record before fill retirement age? Is the answer different if she took spousal benefit at 62 rather than benefit on her own record?

Thanks

fffred · ‎05-06-2020

@JonathanH594812 ,

Your post has been on my mind for awhile now. @GailL1 has provided a good reply. As she said the "clock" starts again when shifting from spousal to survivor benefits (I note that in your scenario the wife begins SS at 62 based on her own record, not spousal). So any reduction in benefits due to drawing before FRA is re-set at the age at which they become a survivor.

My situation is similar but not exactly the same as yours. My wife is 11 years younger than me and has no US work history for SS benefits. I am "retired" now but plan to wait 2 more years to draw SS at age 70. We plan for her to draw spousal at 62, even with the reduction, in order for some greater cash flow.

My thought of my drawing benefits at 70 is so that her survivors benefit is maximized. Spousal benefits do not obtain the "delayed retirement credits" (DRC) that I get by waiting to draw, but survivor's benefits do obtain the DRC. It is true that both spousal and survivor benefits are knocked down if taken prior to their FRA, but at least the survivor draws a greater portion of the insured's benefit (no more than 50% for spouse (occurring at FRA) but up to 100% for survivor, including the DRCs).

Now, at her FRA of 67 I will 78 (67 + 11). So it's not unlikely that I may die before she reaches her FRA. A rule in SS is that someone taking spousal benefits is automatically shifted to survivor benefits, they don't have a choice in this; I forget the form that addresses this but it can be found. Thus a concern of mine was how much her benefit would be knocked down (I would rather that she was given the chance to delay the survivors until her FRA and I would have covered that gap with term life insurance, but that's not how it works).

The rules for reduction of benefits are addressed in the Code of Federal Regulations (CFR) for Social Security at https://www.ssa.gov/OP_Home/cfr20/404/404-0410.htm (it is not a very long read...one page).

I had actually wanted to generate a table that showed our ages at my death, the reduction in my wife's survivor benefit at that age, and then apply the factor of 1.32 for my 48 months of delayed retirement credits (plus there would be any COLA; and any overall reduction in SS benefits due to change in laws).

And I've actually done this. It turns out that should I die at 72 and my wife is 61 (widow/widower can obtain benefits at age 60) the overall factor is she would get 0.9975 of my FRA benefit, call it one times my FRA benefit. This is because the reduction factor at age 61 is compensated for by my DRC of 1.32. The table below is the result of this simple arithmetic, the difficult part was digging up the rules.

The table is reassuring as the reduction for the widow below FRA is not "too egregious". With inclusion of DRC it's even better. My conclusion is that it's not worth the loss of our mutual income with spousal benefits over that several year period (62 through to 67) by having spouse wait until her FRA to take benefits.

For anyone else in a similar situation it is simple enough to put this into a spreadsheet, and even to get monthly data, as for different FRAs, etc.

I had posted this on another forum that was well traveled by some SS experts. No one ever complained about my analysis.

Disclaimer: I'm not an expert, just some random anonymous guy on the internet who likes to do research and crunch numbers.

@JonathanH594812 wrote:
Husband starts collecting SS at age 70. Wife starts collecting at age 62 based on her own work record. Husband dies when wife is at full retirement age. Wife’s survivor benefit will be more than what she receives on her own record. Does she receive full amount of husband’s benefit or is is reduced because she started collecting on her own record before fill retirement age? Is the answer different if she took spousal benefit at 62 rather than benefit on her own record?

Thanks

fffred · ‎05-07-2020

@JonathanH594812

An update to my last response. I mentioned "A rule in SS is that someone taking spousal benefits is automatically shifted to survivor benefits, they don't have a choice in this; I forget the form that addresses this but it can be found". Well, I found it, form SSA-4111.

The more general situation applies to yours: if the wife is taking SS benefits on her own account as well as receiving the spousal benefit increment (you never receive the full amount of both, only the portion of spousal that is in excess of ones own benefit) and the husband dies before the wife reaches her FRA then she can elect out of survivors benefits until she reaches her FRA, so that her survivors benefit is not reduced. That applies in your case. In my case my wife does not have her own SS benefits and would only be drawing spousal/survivor benefit and she can't opt out of survivor's until her FRA.

For the wife in your case to make the election to postpone survivor benefits until her FRA she must file form SSA-4111 (https://www.ssa.gov/forms/ssa-4111.pdf)

This situation is described at https://secure.ssa.gov/apps10/poms.nsf/lnx/0300207005#c

And Ask Larry (I mention him all the time in this forum) has a great column discussing a situation much like yours, see https://maximizemysocialsecurity.com/what-options-would-my-wife-have-if-i-die-she-reaches-fra

(Larry is Laurence Kotlikoff, Professor of Economics at Boston University, and expert on Social Security)

JonathanH594812 · ‎05-07-2020

Fred, thank you. Very helpful.

Jonathan

GailL1 · ‎05-06-2020

@JonathanH594812

I believe this AARP page will answer your question.

AARP: If My Spouse Dies, Can I Collect Their Social Security Benefits?

from the link ~

When a Social Security beneficiary dies, his or her surviving spouse is eligible for survivor benefits. A surviving spouse can collect 100 percent of the late spouse’s benefit if the survivor has reached full retirement age, but the amount will be lower if the deceased spouse claimed benefits before he or she reached full retirement age. (Full retirement age is currently 66 but is gradually increasing to 67 over the next several years.)

If the Survivor claimed her own benefits earlier than FRA - that does not count - it only goes by how old you are when you file for those SURVIVORS BENEFITS. Think of it as replacing one benefit for another in the case of Survivors.

Since the deceased beneficiary, in this case, waited until 70 to file for their benefits, the delayed retirement credits were added in and the survivor does get to continue those too.

That's the way, I understand it.

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