Transition from Spousal Benfit to Survivor Benefit before reaching FRA

[LKWinFla]

The AARP Social Security Resource Center article "How does Social Security work when a spouse dies?" states: "If you were already receiving spousal benefits ... on the deceased work record, Social Security will in most cases switch you automatically to survivor benefits when the death is reported. ... Otherwise, you will need to apply for survivor benefits ..."

I am 77 and receiving retirement benefits. My wife reaches age 60 in Feb 2020 and is considering applying for benefits (hers and the spousal adjustment under the "deemed application" provision). We visited the local SSA office and were told that if she was receiving spousal benefits and I died before she reached FRA (in 2024), she would be offered the opportunity to decline applying for Survivor benefits until she reached FRA, rather than being automatically switched by SSA.

Question #1: Is this true (we've received some incorrect info at this office before)?

Question #2: If she is eligible for Survivor benefits before reaching FRA and declines to apply/receive it until FRA (assuming the answer to Question #1 is yes), would she still receive the Spousal benefit until switching to Survivor benefit or would she only receive benefits based on her own work record entitlement until she switched?

[GailL1]

@LKWinFla 

Saw this today in USA TODAY - think it is what you were asking about -  I think the SSA needs to write their rules with much more clarity.

Now is there a difference in this rule depending upon whether a person at age 62 gets their own (reduced) benefits or a spousal benefit - seems that may be a factor in the confusion or at least how the SSA is writing the rule.

USA TODAY 02/10/2020 - 4 quirky Social Security rules you need to know to avoid retirement planning ... 

. . . . . . according to Elaine Floyd, director of retirement and life planning at Horsesmouth, a financial education company.

Qualify for both retirement and survivors benefits? If you qualify for both a retirement benefit and a survivor benefit, Floyd says you can sequence those benefits for maximum advantage. “For example, you can start the survivor benefit at age 60 and switch to your own maximum retirement benefit at 70,” she says. “Or you can start your retirement benefit at 62 and switch to your full survivor benefit at FRA. Conditions, such as the earnings test (which applies to all benefits received before FRA for people who work, do apply.

[LKWinFla]

Thank you also, FredSmif

Man! The words are there in the SSA docs, but the specific intended meaning is left pretty ambiguous. Your reference to the Ask Larry article provided a pretty clear, succinct answer:

"If your wife is drawing her reduced retirement benefits plus a reduced excess spousal benefit and you die before your wife has reaches her full retirement age (FRA), she could opt to stop receiving the excess spousal benefit starting with your month of death and wait until FRA to receive unreduced widow's benefits (https://secure.ssa.gov/apps10/poms.nsf/lnx/0300207005#c)."

That is, she could continue to receive her own benefit (less the spousal addition) until she reached FRA and receive the unreduced widow's benefit.

Unfortunately, the SSA doc at the provided link is also a little ambiguous as to what benefits are suspended at death and what is awarded at the survivor's FRA. (It addresses a survivor that is "entitled to" spousal benefits, not clearly "receiving" spousal benefits.)  However, a look at the SSA form (SSA-4111) referenced in the SSA doc makes things pretty clear.

It appears the SSA-4111 provides the election to defer survivor benefits until FRA that the SSA office agent told us about.

Thanks again to all for the info!

[fffred]

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@LKWinFla wrote:

Unfortunately, the SSA doc at the provided link is also a little ambiguous as to what benefits are suspended at death and what is awarded at the survivor's FRA. (It addresses a survivor that is "entitled to" spousal benefits, not clearly "receiving" spousal benefits.) 

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In SS jargon "entitled to" means that you have applied for and are receiving benefits. Before that you are just "eligible". I'm sure they define this somewhere, but it's sure not on their Nomenclature page https://www.ssa.gov/agency/glossary/

Your spouse will receive a 'combo' of her own benefit and if that is smaller than her spousal benefit then she'll receive an amount of spousal benefit such that the total amount equals the spousal amount. At your death her spousal portion will end and she may get the survivors benefit (and again it's a combo of that plus her own, but not more than the survivors).

[fffred]

@LKWinFla 

@GailL1 

I am in a situation somewhat similar to yours, I am 67 and my wife is 55. I plan to take SS benefits when I am 70 and tentatively we plan for wife to take spousal benefit at 62. Unlike your situation my wife has no work benefit of her own.

A concern of mine is what would my wife's benefit be should I die before she has reached her FRA (I could even die before she was eligible for any SS benefit...that is covered with a term life policy that runs about another 5 years). My concern was how much her survivor benefit would be reduced if taken before her FRA. ..say that she took spousal benefit at 62, then I die 2 years later and she is automatically (and without the ability on her part to make this election) changed to survivor benefit, then what does that look like? That was my concern.

I'm still mulling over my own question. The reduction amount for a widow/widower below FRA is incredibly difficult to find on the web (in my experience) but I have found it and crunched the numbers, I no longer have concerns about her taking spousal at 62 and being left in a bad situation with respect to Social Security should I die before she reaches her FRA. WIth the potential reduction and my own Delayed Retirement Credits (DRC) there's no way her survivor benefit would be less than my own PIA (plus any COLA).

I believe that GailL has given you excellent insight into the relevant rules. I can't disagree with them (I would wish that it was not true that a spouse is mandatorily converted to survivor benefit prior to their FRA should they not have any SS benefits of their own; I'd prefer that they have the choice to make).

By chance I came across this "Ask Larry" post a few weeks ago and it probably describes something close to your situation (guy is 9 years older than wife, asks her options if he dies before her FRA).

See https://maximizemysocialsecurity.com/what-options-would-my-wife-have-if-i-die-she-reaches-fra

"Larry" is Laurence Kotlikoff, a university professor with vast experience with Social Security and author of several related commercial software programs. His "Ask Larry" collumn has run in print and television for many years (even at AARP). He's collected all of his prior columns in disparate sources into a tremendous information resource on his website (https://maximizemysocialsecurity.com/ask-larry). There are numerous posts about widows benefits, widow's benefits, and survivor's benefits.

[LKWinFla]

Thank you GailL1 (Valued Social Butterfly) for your responses and for correcting the error in my post. My wife was indeed born in 1958 and is considering enrolling this year at age 62. It's unfortunate we cannot get dependable answers from our SSA office... makes your contribution extremely valuable.

One additional question, please: If she is receiving spousal benefits, is the survivor benefit amount determined by the date on which she eventually transition to it independent of when she started taking spousal benefits? (e.g. if she takes spousal benefit early and I hang around until she reaches FRA will she receive 100% of my monthly benefit when the benefit transitions to survivor benefit?)

Thank you again!

[GailL1]

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@LKWinFla wrote:

One additional question, please: If she is receiving spousal benefits, is the survivor benefit amount determined by the date on which she eventually transition to it independent of when she started taking spousal benefits? (e.g. if she takes spousal benefit early and I hang around until she reaches FRA will she receive 100% of my monthly benefit when the benefit transitions to survivor benefit?)

Thank you again!

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The same Social Security Survivors page that I linked before hold your answer:

SSA: Benefits Planner: Survivors | If You Are The Survivor

close to the bottom of the page there is a heading: Survivors Benefit Amount

it says:  (quoting and underlining the most applicable parts)

Your survivors benefit amount is based on the earnings of the person who died. The more they paid into Social Security, the higher your benefits would be.

The monthly amount you (as the Survivor) would get is a percentage of the deceased's basic Social Security benefit. It depends on your age and the type of benefit you are eligible to receive.

If the person who died was receiving reduced benefits, we base your survivors benefit on that amount.

These are examples of the benefits that survivors may receive:

• Widow or widower, full retirement age or older — 100 percent of the deceased worker's benefit amount;
• Widow or widower, age 60  up to their full retirement age — 71½ to 99 percent of the deceased worker's basic amount;

If she gets the Spousal benefit in Feb. 2020 because it is the higher of the retirement benefits for which she is eligible and you die before she reaches her FRA (66 and 10 months), she will get a % of what you are getting at the time of your death based on her age at the time. 

[GailL1]

You said:  My wife reaches age 60 in Feb 2020 and is considering applying for benefits (hers and the spousal adjustment under the "deemed application" provision).

CLARIFICATION:   I believe you meant 62 not 60 - right?  Since you said later in the post that she would reach FRA in 2024 - that would mean her birth year is 1958 and her FRA will be 66 and 8 months.  That means she will reach her SS FRA  in October 2024.

https://www.ssa.gov/planners/retire/retirechart.html 

If that is correct, when she files for (early) retirement benefits in Feb. 2020, under the "deemed filing" rules now in place,  Social Security will look at ALL RETIREMENT benefits for which she is eligible and give her the larger of the Retirement benefit for which she is eligible. 

In her case, this will either be based on:

• her own work record, of which she will receive a reduced amount because she is filing for early retirement at age 62. 
• OR it will be her Spousal benefit of which will be 50% of your benefit reduced by a % because she is filing for early benefits.

When You die, she will be eligible for Survivors Benefits and it is her own Retirement Benefit situation at that time that will determine what she can and cannot do -

This is the Social Security.gov page that explains Suvivors benefits and when they can be switched:

(about halfway down the page)

Situations from Social Security:  https://www.ssa.gov/planners/survivors/ifyou.html#h2 

Note each situation:

• If the Survivor is already receive benefits as a spouse, the benefit will automatically convert to survivors benefits after we receive the report of death.

• If the Suvivor is also eligible for retirement benefits on their own work record (but haven't applied yet), they have an additional option. They can apply for retirement or survivors benefits at that time and switch to the other (higher) benefit at a later date.

• For those already receiving retirement benefits, they can only apply for benefits as a widow or widower if the retirement benefit you receive is less than the benefits you would receive as a survivor. *
  

*  If the Survivor becomes entitled to retirement benefits less than 12 months ago, they may be able to withdraw your retirement application and apply for survivors benefits only. If you do that, you can reapply for the retirement benefits at a later date when they will be higher.  

In the above situation, the less than a year amount of the retirement benefit has to be paid back -

or has to be worked out monitarily before the survivors benefit starts.

You said in your post - We visited the local SSA office and were told that if she was receiving spousal benefits and I died before she reached FRA (in 2024), she would be offered the opportunity to decline applying for Survivor benefits until she reached FRA, rather than being automatically switched by SSA.

If they told you that . . . . they don't understand their own (current) rules.

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I came back to edit and give you a recap of the rule in plain language depending upon your wife's retirement benefit situation at the time of your death.

To recap the rule:  these rules are designed to give the beneficiary the higher benefit of their situation.

1.  IF your wife is getting spousal benefits at the time of your death - SSA switches her to survivors benefits.

2.  If your wife is NOT already receiving retirement benefits based on her on record at the time of your death - she can apply for her retirement or survivors benefits at that time and switch to the other (higher) benefit at a later date.

If your wife is  already receiving her own retirement benefits (or has been recieving them less than 12 months and wants to withdraw her application and pay them back) at the time of your death, she can look into which benefit (her own work record or Survivors benefit) is the greater and apply for it or keep recieving what she is getting under her own retirement - she gets whichever is higher.