Social Security benefits are often the largest source of income for those aged 65 and older. However, many Americans don’t fully understand how the program works, which can lead to financial mistakes.
For instance, a surprising 44% of adults didn’t know that the surviving spouse can inherit the larger Social Security benefit after the death of a partner. Understanding how Social Security benefits work—whether for retirees, spouses, or survivors—is essential for financial planning.
Understanding the Different Types of Social Security Benefits
The Social Security Administration provides three types of benefits: retired-worker benefits, spousal benefits, and survivors’ benefits. Here’s a breakdown of each:
Retired-Worker Benefits
These benefits are based on a worker’s lifetime earnings and the age at which they start claiming Social Security. The formula for calculating benefits considers the 35 highest-paid years of a worker’s career, adjusting for inflation.
Full Retirement Age (FRA) is when a person is entitled to 100% of their benefits.
Claiming before FRA results in a reduced benefit, while claiming after FRA increases the benefit.
The earliest you can claim retirement benefits is age 62, and after age 70, there are no additional delayed retirement credits.
Spousal Benefits
Spouses can claim Social Security based on their partner’s earnings history under certain conditions. Here are the qualifications:
- The spouse must be at least 62 years old.
- The primary worker must already be receiving Social Security benefits.
Spouses who claim at FRA will receive 50% of their partner’s primary insurance amount (PIA). Claiming earlier reduces the benefit, with up to a 35% reduction for those who claim at age 62.
Unlike retirement benefits, spousal benefits do not receive delayed retirement credits, so there’s no advantage to delaying beyond FRA.
Survivors’ Benefits
Survivors’ benefits are available to a widow(er) after the death of a spouse. To qualify:
The survivor must be at least 60 years old.
The couple must have been married for at least nine months before the spouse’s death.
The surviving spouse must not have remarried before age 60.
If a survivor claims benefits at FRA, they will receive the full amount of their spouse’s Social Security benefit. Claiming before FRA reduces the amount, up to a 29% reduction.
What Happens to Your Social Security Benefit When Your Spouse Dies?
When a spouse passes away, the surviving partner loses one income stream. Survivors’ benefits allow the surviving spouse to keep the larger of the two Social Security benefits.
If the surviving spouse already receives the larger benefit, nothing changes. However, if they receive the smaller benefit, they can switch to survivors’ benefits and receive the higher amount.
Example:
Mark receives $1,500/month, and his wife, Mary, receives $1,250/month.
If Mary passes away, Mark doesn’t need to apply for survivors’ benefits, as he already receives the larger benefit.
If Mark passes away, Mary will receive $1,500 per month (the larger benefit) by switching to survivors’ benefits.
Survivors’ benefits are equal to 100% of the deceased spouse’s benefit, unlike spousal benefits, which are capped at 50%. This means that delayed retirement credits are transferred to the survivor. In cases where one spouse is significantly older and has a higher PIA, delaying Social Security until age 70 may maximize the survivor’s benefit.
The $23,760 Social Security Bonus Most Retirees Completely Overlook
Many retirees are behind on their savings, but there are “Social Security secrets” that can help boost your retirement income. For instance, a little-known strategy could add as much as $23,760 to your benefits each year.
Learning how to optimize your Social Security benefits can provide a more comfortable and secure retirement. Discover these strategies and maximize your benefits when you join Stock Advisor.
