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.

Social Security Spousal Benefits Part 3: Restrict the Scope Strategy

As we continue our series on Social Security, we'll next look at a strategy referred to as "Restrict the Scope."  It is recommended you first read our posts on Social Security, Spousal Benefits and File and Suspend before continuing.

As with File and Suspend, Restrict the Scope refers to a filing strategy used by married couples to maximize their Social Security benefits.  It is often mentioned when both spouses have similar earnings records, but has many more practical applications.  In fact, Restrict the Scope is generally much more utilized than File and Suspend.

To review, briefly, everyone is entitled to a Social Security benefit based on their own earnings record.  As a spouse, you are also entitled to benefits based on your partner's earnings record equal to a maximum of 50% of their Primary Insurance Amount (PIA).  Simply put, you receive the greater of your benefit or the Spousal Benefit, but not both.  Your spouse must file for Social Security themselves in order for you to receive Spousal Benefits.

Social Security Spousal Benefits Part 2: File & Suspend Strategy

In our recent posts, we've provided some basics on Social Security and Spousal Benefits.  Armed with that information, let's start taking a simple look at some strategies that may allow married couples to more effectively maximize their lifetime Social Security benefits.  We'll begin with a strategy often called "File and Suspend." (If you haven't read the previous posts, you are encouraged to do so first before reading on.)

As we’ve already noted, you are always entitled to a Social Security benefit based on your own earnings record. As a spouse, you are also entitled to a benefit based on your partner’s earnings record, up to half of their Primary Insurance Amount (PIA), called a Spousal Benefit. (You receive the greater of your own benefit or half of your spouse’s, but not both.) However, in order for you to receive a Spousal Benefit, your spouse must have filed for Social Security benefits themselves. (Note: This is not the case when claiming on an ex-Spouse, but that’s a topic for another post.)

Social Security Spousal Benefits - Part 1

The more frequently we discuss Social Security with our clients - which is often - the more we realize just how complicated Social Security can be.  In particular, we have found that Spousal Benefits can be among the most confusing provisions in the Social Security system.

While you should not expect to understand Spousal Benefits fully after only a short reading, we do hope to shed at least a little more light on the topic.  First, let's see how the Social Security Administration explains it:

"Even if you have never worked under Social Security, you may be able to get spouse's retirement benefits if you are at least 62 years of age and your spouse or ex-spouse is receiving or eligible for retirement or disability benefits.

If you begin receiving benefits at your full retirement age, your benefit can be equal to one-half of your spouse's full retirement amount."

(http://www.ssa.gov/retire2/applying6.htm#a0=0)

Social Security Benefits - When to Begin Collecting Them

As with most financial planning topics, this question, although seemingly straightforward, is actually rather complicated. As a result, when it comes to retirement planning, there are few issues that raise as much interest right now as Social Security.

Although it’s been around since 1935, most people today still admit knowing very little about Social Security and how it works. Yet, it is an important aspect of any retirement plan. Consider the following statistics:

• Nine out of ten individuals age 65 and older receive Social Security benefits.¹
• Social Security benefits represent about 39% of the income of the elderly. ¹
• Social Security provides more than half of the income for nearly two-thirds (65%) of elderly beneficiaries.²
• For almost four out of ten elderly recipients (36%), Social Security provides more than 90% of their income.

According to the Social Security Administration, the average monthly benefit being paid to current retirees is $1,234 per month. For a 66-year-old man with an average life expectancy of 82, this represents total payments of well over $200,000 in today’s dollars.

With so much at stake, the decision to begin Social Security benefits becomes a critical one. Let’s review the basics, setting aside for the moment the rules of eligibility.