Monday, October 28, 2013

Social Security - Survivor Benefits

Social Security remains a hot topic - both with the national media as well as within our practice.  As we continue to discuss Social Security with clients, there is one area receiving increased attention - Survivor Benefits.

And with good reason: statistics indicate that the poverty rate for elderly widows is three to four times higher than that of their married counterparts.  Without a doubt, widowhood typically causes a decline in economic well-being for the surviving spouse.

No less an authority than the Bible provides a clear mandate:

"You must help needy orphans and widows and not let this world make you evil." James 1:27b (Contemporary English Version)

For their part, policymakers have made several changes to claiming options and benefit amounts within Social Security to aid surviving spouses.  Let's take a look at three scenarios to better understand the matter.

1)   A woman is going to turn 60 in a few months.  She is divorced and was married to her ex-husband for 10 years.  The ex-husband is still living.

2)     A woman is going to turn 60 in a few months.  She is divorced and was married to her ex-husband for 10 years.  The ex-husband recently passed away.

3)     A woman is going to turn 60 in a few months.  Her current husband just recently passed away.  

In scenario 1, it is important to note that, for purposes of Social Security benefits, a marriage lasting at least 10 years is treated as though it were a current marriage, provided the woman has not remarried before age 60.  In other words, in this scenario, the woman is entitled ot Spousal Benefits even though they are currently divorced.

However, Spousal Benefits are not to be confused with Survivor Benefits.  In this case, the woman can claim on either her own earning record of her spouse's (ex-husband's in this case), but not until she is 62.  Even then, the benefit would be reduced if she is not yet her Full Retirement Age (FRA).

In scenario 2, as in scenario 1, the woman is considered to be currently married when it comes to Social Security.  So, as the ex-husband has passed away, she would become eligible for Survivor Benefits.  Again, she would have the option of collecting her own earnings record, but not until 62, or the Survivor Benefit.  However, one possible advantage to the Survivor Benefit is that you can collect it as early as age 60.

Finally, in scenario 3, as it is her current husband who passed away, she is eligible for Survivor Benefits even if they were only married for as little as 9 months, and these benefits can begin at age 60.  She is also eligible to collect on her own earnings record beginning at age 62.

Interestingly, if a surviving spouse has more than one late spouse, he or she is eligible to receive Survivor Benefits based upon the highest possible benefit from any of the prior spouses, as long as they were married for at least 10 years.  That would apply to both scenarios 2 and 3.

One final note is that Social Security allows for special claiming rules for surviving spouses that are also eligible for a retirement benefit.  Surviving spouses have the option to claim one benefit first and switch to the other benefit later.  This may allow for the delayed benefit to increase, thus providing potentially higher income at a later age.

With so much at stake financially, it is critical to consider all of the implications and strategies before filing for Social Security benefits.  We at Kemp Harvest Financial Group are committed to helping our clients make informed decisions regarding Social Security, taking into account the various assumptions, factors and options available.  If you have any questions or if we can assist you in any way, please feel free to contact us directly.


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