When a Husband Dies, Does the Wife Get His Social Security?

Estate Planning / Full Retirement Age, Social Security Benefits, St. Petersburg Estate Planning Attorney, Surviving Spouse, Survivor Benefits

When to take Social Security benefits is a decision that has major consequences for not only the worker but their spouse. There are a few mistakes people frequently make that end up costing their loved ones, advises the recent article “If You Love Your Spouse, Don’t Make This Social Security Mistake” from NASDAQ. The most common mistake concerns deciding when to start taking Social Security benefits.

When you decide to start taking Social Security benefits will effect your spouse’s benefits after you pass away.

By starting to claim benefits at age 62, you’ll get a reduced amount compared to what you would receive at your full retirement age. If you can wait until age 70 to claim Social Security, you and your spouse will benefit from the delayed retirement credits.

Most retirees base their benefit decision on how long they expect to live and their financial needs. People who expect to live a long time will get more money if they can wait until age 70, when their monthly benefits will be larger. People who don’t expect to live very long past retirement, usually take their benefits early.

However, when you decide to take your benefits has an impact on your surviving spouse. When both members have worked and earned their benefits, it’s not as big of an issue. However, for a spouse who does not have a work history of their own or whose earnings are significantly lower, this can have a big financial impact.

The issue is survivor benefits. You are entitled to receive a survivor benefit when your spouse dies, and that benefit is based on their work history. If the surviving spouse claims benefits earlier than full retirement age, there will be a reduction.

However, if the deceased spouse claimed retirement benefits early, the surviving spouse will receive a reduced survivor benefit.

Here’s an example. Let’s say a married person, age 62, would get a retirement benefit of $1,500, if they retired at age 66 and 8 months. The person has a terminal illness and will not live more than a few more months. The spouse is also 62. Some people in this situation would start taking their Social Security benefits immediately. The reduced monthly payment would be $1,075. It’s less than the $1,500, but it’s better than nothing.

The issue is that the surviving spouse would only be eligible to receive $1,075 per month. That payment would only be if the surviving spouse waited until full retirement age. If a claim were made before full retirement age, the monthly benefit would be $884.

If the terminally ill person chose not to claim Social Security at all, the surviving spouse would be entitled to a survivor benefit of $1,500, again if they waited until full retirement age.

That $350 difference may not feel big on paper, but when there is only one income, it adds up. Waiting to take benefits could make all the difference in the quality of life your spouse enjoys for the rest of their life.

Reference: NASDAQ (Nov. 14, 2020) “If You Love Your Spouse, Don’t Make This Social Security Mistake”

Facts and Figures for Older Workers and Retirees in 2020

Estate Planning, Health Care, Medicare, Social Security / 401(k), 403(b), Full Retirement Age, IRAs, Medicare, Retirement Accounts, SIMPLE, Social Security, St. Petersburg Estate Planning Attorney, Thrift Savings Plans

A new year always brings change, and this year is no exception. From Market Watch, the article “Numbers that older workers and retirees need to know in 2020” provides key information for this new year.

Retirement Plan Changes. Limits for how much can be saved in 401(k), 403(b), Thrift Savings Plan, and most 457 plans have increased by $500 to $19,500 for 2020. If you are 50 and older, the “catch-up” contribution has also increased by $500.

For those with SIMPLE retirement plans, which are usually from small businesses with 100 or fewer employees, you can increase savings by $500 to $13,500.

What hasn’t changed—if you have an individual traditional IRA, you can save $6,000, with a catch-up contribution of $1,000.

Social Security Changes. The Social Security Administration reports that the average monthly benefit in 2019 was $1,356.05. This will rise by 1.6% in 2020, which will mean an increase of $21.69 per month. Last year, some 63.8 million Americans took Social Security benefits. It was the first year since the program began in 1935 that spending topped $1 trillion.

Another change to Social Security in 2020 is the longer period of time to reach full retirement age. For people born in 1958, this now increases to 66 years and eight months. The longer period is also going to increase in 2021 and 2022—making the full retirement age 67 for anyone born in 1960 or later.

That doesn’t mean people can’t get Social Security benefits earlier—you can elect to take benefits as early as age 62—but you’ll receive less. If you take benefits at age 62, they’ll be 75% of the monthly benefits because you will have added 48 months. At age 65, you’ll receive 93.3% of full benefits because of adding an additional 12 months. If you are taking spousal benefits, there are more numbers to consider.

Medicare Changes. The good news was the increase from Social Security. The bad news? Standard monthly Part B premiums will increase 6.7%, from $135.50 in 2019 to $144.60. That’s the minimum premium. Depending upon your premium, they could go as high as $491.60 per month. Medicare officials blame higher drug prices on the increase.

Health care costs are part of a rising tide of costs facing retirees and older workers. Considering how few Americans have enough money saved for retirement, this is going to become more of a national issue as boomers and millennials age. It should serve as a reminder for all—save as much as you can for retirement, starting now.

Reference: Market Watch (Dec. 28, 2019) “Numbers that older workers and retirees need to know in 2020”

What Happens to Social Security when a Spouse Dies?

Estate Planning, Retirement Planning, Social Security / Benefits, Death Certificate, Full Retirement Age, Social Security, St. Petersburg Estate Planning Attorney, Widow, Widower

Mary is right to be concerned. She is worried about what will happen with their Social Security checks when her spouse dies, who she needs to notify at their bank, how to obtain death certificates and how complicated it will be for her to obtain widow’s benefits. Many answers are provided in the article “Social Security and You: What to do when a loved one dies” from Tuscon.com.

What happens to Social Security after a spouse dies — Trying to figure out what happens to Social Security after a spouse dies can be complicated.

First, what happens to the Social Security monthly benefits? Social Security benefits are always one month behind. The check you receive in March, for example, is the benefit payment for February.

Second, Social Security benefits are not prorated. If you took benefits at age 66, and actually turned 66 on September 28, you would get a check for the whole month of September, even though you were only 66 for three days of the month.

On the other hand, if your spouse dies on January 28, you would not be due the proceeds of that January Social Security check, even though he or she was alive for 28 days of the month.

Therefore, when a spouse dies, the social security monies for that month might have to be returned. The computer-matching systems linking the government agencies and banks may make this unnecessary, if the benefits are not issued. Or, if the benefits were issued, the Treasury Department may simply interrupt the payment and return it to the government, before it reaches a bank account.

There may be a twist, depending upon the date of the decedent’s passing. Let’s say that Henry dies on April 3. Because he lived throughout the entire month of March, that means the benefits for March are due, and that is paid in April. Once again, it depends upon the date and it is likely that even if the check is not issued or sent back, it will eventually be reissued. More on that later.

Obtaining death certificates is usually handled by the funeral director, or the city, county or state bureaus of vital statistics. You will need more than one original death certificate for use with banks, investments, etc. The Social Security office may or may not need one, as they may receive proof of death from other sources, including the funeral home.

A claim for widow’s or widower’s benefits must be made in person. You can call the Social Security Administrator’s 800 number or contact your local Social Security office to make an appointment. What you need to do, will depend upon the kind of benefits you had received before your spouse died.

If you had only received a spousal benefit as a non-working spouse and you are over full retirement age, then you receive whatever your spouse was receiving at the time of his or her death. If you were getting your own retirement benefits, then you have to file for widow’s benefits. It’s not too complicated, but you’ll need a copy of your marriage certificate.

Widow’s benefits will begin effective on the month of your spouse’s death. If your spouse dies on June 28, then you will be due widow’s benefits for the entire month of June, even if you were only a widow for three days of the month. Following the example above, where the proceeds of a check were withdrawn, those proceeds will be sent to your account. Finally, no matter what type of claim you file, you will also receive a one-time $255 death benefit.

For more on this topic and how to make sure your wishes are carried out and your assets are protected after you pass away visit the Mastry Law website.

Reference: Tuscon.com (March 13, 2019) “Social Security and You: What to do when a loved one dies”

Suggested Key Terms: Social Security, Benefits, Widow, Widower, Full Retirement Age, Death Certificate

Another Facet of Social Security to Learn: The Earnings Test

Retirement Planning, Social Security, Tax Planning / Earnings, Full Retirement Age, Social Security, St. Petersburg, Tax Planning

If it seems like every time you start to understand Social Security, there’s something else to learn, you’re right. However, this is an important part of your retirement income, so it’s important to understand.

The Social Security earnings test is a way that the agency determines the limit of the amount of money individuals who have not yet reached full retirement age (FRA) can earn, while they are collecting Social Security retirement benefits.

For 2018, for every $2 that a worker who has not yet reached FRA earns over the annual threshold limit of $17,040, Social Security will withhold $1 from your benefits.

The Social Security benefit threshold rises significantly (to $45,360 in 2018) in the year you attain your full retirement age (FRA). At that point, one dollar will be withheld for every three dollars you earn over that threshold. The earnings limit is effective the first of the year and indexed annually.

Investopedia’s recent article, “How the Social Security Earnings Test Works,” says that everyone getting Social Security benefits prior to their full retirement age is subject to the earnings test—even widows and widowers receiving survivor benefits and minor children receiving benefits on a deceased parent’s record, if the child earns more than the annual limit. If a minor child is receiving benefits based on a parent’s work history and the parent is still living and under full retirement age, the earnings test for the child’s benefit will be subject to the amount earned by the parent.

Let’s look at how the earnings limit is applied. In the first year you claim Social Security prior to your full retirement age, you’re subject to a monthly earnings test beginning the month you start receiving benefits ($17,040 ÷ 12, or $1,420 per month in 2018). As a result, you can earn as much as you want prior to the month you startyour benefits.

In subsequent years, until the year you reach FRA, you’re subject to an annual earnings limit each year after the first year, until the year you reach your full retirement age. At the start of each year, you’ll be asked to estimate how much you plan to earn. If your estimated earnings are less than the annual limit for that year, there won’t be any Social Security benefits withheld.

The earnings limit in the year when you reach your full retirement age is much higher ($45,360 in 2018). This is a monthlyearnings limit ($45,360 ÷ 12 or $3,780 per month), if it’s the first year you are claiming benefits, but an annualearnings limit if it’s the second or subsequent year you’re not receiving benefits.

The annual gross earnings, as reported on your W-2, are used. Therefore, contributing to a 401(k) or similar retirement plan to reduce earnings subject to state and federal income taxes won’t impact your earnings for the earnings test. However, payments received “on account of retirement,” like a severance package, aren’t subject to the earnings test.

Remember that the earnings of your spouse may be considered, when applying the earnings test for your benefits. If you’re claiming benefits based on your currentspouse’s work record, and your spouse is under FRA and continues to work, his or her earnings are considered when applying the earnings test for your benefits (even if you’ve already attained FRA). However, if you’re claiming benefits on an ex-spouse’srecord, only your current earnings and age are used when applying the earnings test.

Self-employed people have to work fewer than 45 hours per month in their business, otherwise benefits claimed prior to FRA will be withheld, no matter how much they earn.

When the Social Security Administration (SSA) determines you have or will exceed the earnings test based on the estimated earnings you give them, they’ll calculate the amount to withhold and begin doing so immediately. They’ll withhold payment of full benefit checks, until they receive the full amount overpaid, then they’ll go back to remitting your monthly benefit.

Depending on how much you will earn, it does sometimes make sense to apply for Social Security before your FRA, even if you might be subjected to the earnings test. For instance, a widow or widower with one income who needs the additional income might file for benefits earlier than they had anticipated. You’ll want to understand all of your options, before making the decision to file.

Reference: Investopedia (September 18, 2018) “How the Social Security Earnings Test Works”

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