Social Security offers several different types of benefits to the survivors of deceased beneficiaries, but widow and widower benefits are the type of survivor benefits that affect the most beneficiaries. Though it can be unpleasant to think about you or your spouse dying, it’s a good idea for married couples to include widow or widower benefits into their retirement planning calculations, especially if one spouse significantly out-earned the other.
Unfortunately, in addition to the psychological difficulty of thinking about dying or losing your spouse, the calculations that Social Security uses to determine the size of a spousal survivor benefit can be quite complex. That’s why it’s important for married couples to understand how their claiming strategy for retirement benefits can affect an eventual widow or widower benefit. Let’s look at a breakdown of how this works:
The Importance of the Deceased Spouse’s Retirement Benefit
In general, a Widow or Widower Insurance Benefit (WIB) is equal to 100% of the deceased spouse’s retirement benefit. However, to calculate the exact WIB, Social Security uses three factors:
- If the deceased spouse was already receiving retirement benefits.
- The age of the deceased spouse when he or she died.
- The age at which the surviving spouse takes WIB.
Of these factors, you and your spouse are able to control the first and third. In particular, if you want to make sure to leave the largest WIB possible, it makes sense to put off claiming retirement benefits until at least reaching full retirement age, since Social Security at least partially determines the size of your spouse’s WIB based upon your retirement benefit.
This means that if you wait until your full retirement age and receive your full primary insurance amount (PIA), the survivor benefit based on your account will equal your PIA. Take earlier benefits, and the survivor benefit will be lower; later benefits, and it will be higher.
Taking WIB Early Can Reduce Your Benefit
In addition to the size of the deceased spouse’s retirement benefit, the timing of when a surviving spouse takes WIB can affect the amount of the benefits. Surviving spouses are eligible to take WIB as early as age 60, but the benefits are reduced if taken before full retirement age.
Each year you wait between age 60 and your FRA, Social Security increases your WIB amount by approximately 4.8 percent—until you reach the full, unreduced WIB amount at FRA. There are no delayed retirement credits available for WIB, so there is no reason to wait to collect WIB past full retirement age.
Depending on when you or your spouse take retirement benefits, there are four separate formulas Social Security might use for calculating WIB, before accounting for the age of the surviving spouse when they take WIB:
- If you are not yet receiving retirement benefits (RIB) and pass away before full retirement age (FRA)
Your PIA = Spouse’s WIB
- If you are receiving RIB and pass away after FRA
Your PIA + Delayed Retirement Credits = Spouse’s WIB
- If you are not yet receiving RIB and pass away after reaching FRA
Your PIA + Delayed Retirement Credits = Spouse’s WIB
(To calculate your delayed retirement credits in this case, the Social Security Administration gives you DRC equal to what you would have received if you filed for your retirement benefits on the day you died.)
- If you are receiving RIB and pass away before FRA
This is by far the most complex situation for calculating WIB. To figure out the WIB amount in this case, the Social Security Administration calculates three different amounts and compares them:
- The retirement benefit amount the deceased spouse was receiving.
- 5 percent of the deceased spouse’s PIA
- The age-reduced WIB for the surviving spouse if the WIB equaled the deceased spouse’s PIA. The formula for this calculation is as follows:
Deceased Spouse’s PIA – Age-Based Reduction Amount = Age-Reduced WIB
Once these three numbers have been calculated, Social Security compares them. If #3 is the lowest of the three calculations, it becomes the surviving spouses base WIB—which, remember, can still be age-reduced below that point. If #3 is the highest amount of the three calculations, then the higher of either #1 or #2 becomes the surviving spouse’s base WIB.
Deeming and Survivor Benefits
Deemed filing is another excellent reason why any beneficiary who can afford to do so should wait to take retirement benefits until full retirement. With deemed filing, when you claim any single benefit to which you are entitled, the Social Security Administration treats your claim as if you are requesting every benefit to which you are entitled. Because of the complexities of early filing and the ways that various benefits affect each other, that can cost you money in your monthly benefits.
However, survivor benefits like the widow or widower benefit are not subject to deemed filing. This means that a beneficiary who is eligible for WIB can collect that survivor benefit while allowing his or her unclaimed retirement benefit to accrue delayed retirement credit. Of course, this only works if the retirement benefit is “unclaimed.” If you have already claimed your retirement benefit when you become eligible for WIB, Social Security will give you the larger of the two benefits, rather than allow you to take your survivor benefit while your retirement benefit grows.
From Confusion to Clarity
The calculations for determining widow and widower insurance benefits are among the most complex Social Security formulas, and it can be daunting for the average married couple to try to figure out the numbers. However, Social Security has tried to make at least one decision clear: waiting for retirement benefits not only increases your own monthly benefit, but it will also increase your spouse’s eventual survivor benefit.
In short, though there are a number of calculations to get you there, the bottom line is that everyone who can afford to wait until full retirement age to take retirement benefits should plan on doing so. Your spouse will be glad you did.
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