Maximizing Social Security survivor benefits require careful study

One of the most important elements in Social Security planning – how to maximize benefits for a survivor – can be very tricky.

When one half of a couple receiving Social Security benefits dies, we know one check will stop being received. We also know it will be the smaller one.

But life’s expenses will not be cut in half at the death. The home still must be maintained, property taxes and utilities paid, with many other costs continuing. The only savings is from reduced food and clothing expenses. There may even be an increase in cost to hire someone to do the work that was done by the deceased spouse. Careful Social Security planning might lessen this income gap.

There are several ways to receive Social Security benefits.

They can be based on your own work record, a spouse’s work record or even the record of an ex-spouse under certain conditions.

If benefits are started before full retirement age, which is 66 for anyone born before 1954 and age 67 for anyone born after 1960, you will receive reduced benefits. People born in between these years have a full retirement age that goes up two months a year.

It is important to remember the Bipartisan Budget Act of 2015 changes some of the rules about filing some restrictive benefits, but did not change the rules about survivor benefits. This is very important when trying to maximize Social Security income. It is also important to realize that there is an earnings test if you are receiving benefits before full retirement age. In 2017, the earnings test is based on $16,920. For every two dollars your earn from working above this figure, you will have your benefit reduced by one dollar. Basically if you earn more than $38,520 you will not receive any Social Security payments. Once you reach full retirement age, there is no longer any earnings test.

If you are receiving spousal benefits at the time of death, they will stop. You need to analyze if it is to your advantage to receive checks based on your work record or receive survivor benefits. Your age at the time of death is an important consideration. It is also important to consider which partner was the high earner. If a wife is under full retirement age when her husband dies, she can choose when to start her survivor benefit. She may have been planning to delay her own benefit until 70 to maximize it.

If her husband’s benefit is higher than her delayed benefit would be, it may make sense to start her own reduced benefit at age 62 and switch to her survivor benefit at full retirement age. If she starts her survivors benefit before she reaches full retirement, she will permanently receive a reduced benefit. There are many other twists to survivor benefits that we do not have space to deal with today, but will discuss further in a future column.

A couple of important points to remember. If your spouse started their benefits after they reached full retirement age, you received the delayed benefits in your check. For example, if someone born before 1954 waited until age 70 to start benefits, you get a monthly check for 132 percent of what they would have received. If the spouse died before reaching full retirement age, you will receive what they would have if they lived to full retirement age as long as you have reached your full retirement age. You do not earn delayed credit after their death. Social Security is also gender neutral, so the same rules apply to both spouses.

Social Security planning is very important to retirement planning. Work with someone who understands it completely.

Gary Boatman is a Monessen-based certified financial planner and author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

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