Social Security survivor benefits have some unique rules which can be especially hard to remember. Survivor benefits can seem similar to other parts of the Social Security system, but they actually have some significantly different features and regulations. Following is a summary of those unique features and and how survivor benefits differ from the more common Social Security benefits.
The formal title of the Social Security program, Old Age, Survivor and Disability Insurance (OASDI) provides an immediate clue that the Survivor program is distinct from the old age portion of the system to which most of us are usually referring when we say Social Security. The Disability portion of the program has its own trust fund and is totally separate program. The Old Age and Survivor programs, however, have a hybrid relationship, sharing the same trust fund while operating under some significantly different rules.
OLD AGE VS. SURVIVOR BENEFITS
The differences between the spousal benefits of the Old Age program and survivor benefits are the heart of the issue. Spousal benefits are benefits based on a living spouses (or ex-spouses) work history. Survivor benefits are benefits based on a deceased spouses (or ex-spouses) work history.
Here are the primary differences between Survivor and Spousal benefits:
1) Survivor Benefits are much higher, as much as twice as high. Maximum survivor benefits are 100% of the deceased workers last Social Security benefit. Maximum spousal benefits are only 50% of the workers SS benefit.
2) The workers benefit used to calculate benefits could be different in each case. Survivor benefits are based on the deceaseds Full Retirement Age (FRA) benefit plus any delayed retirement credits the worker may have accrued by waiting as late as 70 before filing for their benefits. Spousal benefits are based only on the workers FRA benefit and are not enhanced by any delayed retirement credits for the worker.
3) File before the Full Retirement Age (FRA) and either benefit will be reduced, although not in the same way. At the earliest allowable age for spousal benefits of 62 one will only get 35% of the workers benefit. A widow claiming survivor benefits at the earliest possible age of 60 (two years younger, another difference) will get 71.5% of the deceased workers benefit.
4) The window for a Full Retirement Age at 66 is slightly different. For spousal benefits FRA is formally 66 for people born between 1943 and 1954. For survivor benefits FRA is 66 for people born between 1945 and 1956. If you are born in 1944 or 1955 you will have a different FRA for each benefit.
5) The minimum length of marriage required in order to qualify for either benefit differs, 12 months for spousal benefits but only nine months for survivor benefits. There are different exceptions to each of these.
6) If one is divorced and collecting benefits on the work record of the ex-spouse, remarrying may affect benefits differently. Remarriage will completely nullify any spousal benefits based on the ex-spouse, no matter the age at which the person remarried.
If the ex-spouse has died however, and the survivor remarries after the age of 60, they can keep the survivor benefit even though they are now remarried. This sets up an interesting situation where the remarried person will ultimately have the option of choosing between three benefit options: a survivor benefit on the ex-spouse, a retirement benefit on their own work record or a spousal benefit based on their current spouse.
It may also present some important planning opportunities. For instance, if a woman collecting survivor benefits on her ex-husband is 59 and planning to remarry, she might want to delay the wedding bells until her 60th birthday in order to keep receiving the survivor benefit based on her decrease ex-husband.
Finally, the benefit calculations for the two benefits are independent of each other. For instance, filing for one benefit before FRA will not affect the filing for the other benefit. For instance, a person can apply for survivor benefits before FRA thereby reducing their survivor benefits. This early survivor filing will not affect their application for their own old age retirement benefits. They would still be eligible to collect their full benefit at 66 or even accrue Delayed Retirement Credits by waiting until age 70.
These are most of the important differences between survivor and spousal benefits. It gets confusing and hard to remember so you might want to keep this summary handy. I know that I will.
Paul Norr is a financial planner in Thousand Oaks, Calif. and writes about retirement and planning issues. His website is www.paulnorr.com.