The widow/widower benefit is one of the most overlooked and misunderstood parts of Social Security.
We see it time and time again, people either:
- Don’t know about it, OR
- Get incorrect/confusing advice about it from either the administration itself or a financial advisor
Social security provides for a survivor benefit, which says that you can either draw 100% of your own benefit (based on your own working history) or 100% of your spouse’s, if your spouse passes before you.
An important clarification point: While your spouse is alive, the rule is: you can draw on the higher of either your own benefit OR 50% of your spouse’s benefit. You cannot draw both; Social Security will pay the higher of the two.
If you survive your spouse, there is an opportunity (this is the one we see the surviving spouse miss constantly) to draw on your spouse’s benefit and then switch to your own benefit (or vice versa), this is the only remaining rule that allows for spouses to be able to draw on their spouse’s benefit, while waiting to turn on their own benefit, or vice versa. In 2015, the Bipartisan Budget Act was phased out. It eliminated the file-restricted and filing-suspended benefits that allowed spouses to maximize Social Security by switching between spousal and their own benefits (or vice versa) while both spouses were living. But it did not do away with the survivor benefit, which still allows for the surviving spouse to “flip over” between benefits.
How it Works
If you are a widow or widower, the survivor benefit allows you two options:
- A.) You can take your deceased spouse’s benefit as early as 60 (the earliest you can take is normally 62), while deferring your own benefit (based on your working history) until later, where it increases 8% every year until it maximizes at 70. You are receiving income from your spouse’s working history while allowing your own benefit to grow until you flip over to it.
OR
- B.) You can take your own benefit (based on your working history) as early as 62 and change over to your deceased spouse’s benefit at your full retirement age (FRA) (e.g., 67)
Important note: The rules around taking Social Security early still apply. Each year you take the benefit early, it is reduced by approximately 6%. However, under these circumstances, taking early only affects one benefit; the other continues to grow. Again, this is the part people miss; they are not familiar with the fact that while you are reducing one benefit, whichever you took first, the one you have not turned on will continue to grow, and you can flip to it later.
The rules on working before full retirement age will apply to the benefit for which you apply. (See our article “How does working while taking social security impact my social security” for more details.)
In scenario A, where you take your deceased spouse’s benefit first, you are reducing the benefit they were eligible for by 6% a year every year you take it early. Still, your own benefit remains intact and growing.
Important Note: In scenario A, your own benefit will grow by 8% every year until age 70, which is the latest you should wait to flip over to your own benefit.
Under scenario B, where you take your own benefit first (based on your working history), your benefit is reduced by 6% every year you take early; however, your spouse’s benefit is intact, and you will get 100% of their benefit when you switch over to their benefit at your Full Retirement Age.
Important Note: In scenario B, your deceased spouse’s benefit will NOT grow past your Full Retirement Age, so you should make sure to flip over to it at your FRA.
So what makes sense as a widow/widower? Option A or Option B?
You’ll want to go over both options in the context of your overall retirement income plan to make a decision.
Conclusion
If you are a widow or widower between the ages of 60 and 70, this is not a decision to “figure out later”. The survivor benefit is one of the few remaining Social Security rules that allow you to strategically choose which benefit to take first and which to let grow—and once a claiming decision is made, it is often difficult or impossible to undo.
The most significant risk we see isn’t choosing Option A or Option B. It’s not knowing you even have a choice.
Before you file for Social Security, make sure you understand how the survivor benefit fits into your broader retirement income plan. A coordinated review can help ensure you are not leaving tens or even hundreds of thousands of dollars on the table over your lifetime.
If you are a widow or widower and want clarity on which strategy makes sense for you, we encourage you to have your options reviewed before you file—so you can move forward with confidence and Retire With Purpose.
The Vocare Wealth Advisors Team
Any opinions are those of Vocare Wealth Advisors and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
The examples are hypothetical stories and not indicative of any specific situations or client. It is presented only as an example and not intended as investment advice. Investing involved risk and there is no assurance that any investment strategy will be successful.
