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Chapter 4: Three Kinds of Social Security Benefits

Chapter 3: Four Categories for Calculating Benefits

There are three kinds of benefits available through Social Security. These include:

  1. Spousal Benefit
  2. Divorced-spousal Benefit
  3. Survivor Benefit

1. Spousal Benefit

If you wait until you reach Full Retirement Age to apply for a spousal benefit, you will receive the maximum benefit possible. This amount is one-half of the amount your spouse’s benefit. Again, this is only if the spouse’s benefit is applied for at Full Retirement Age. (see chapter 3)

If you choose to begin receiving spousal benefits before you reach Full Retirement Age, your benefit amount will be reduced depending on the age in which you apply.

Example: If you apply at age 62 and your Full Retirement Age is 66, then your benefit would be 75% of your FRA benefit. This means your spousal benefit will be reduced as well. Again, your spousal benefit is one-half of your spouse’s benefits and, in this example, it is further reduced by 25% to determine your spousal benefit amount.

Bonus One nice thing about determining spousal benefits is that if you were born on January 2, 1954 or later, upon application, you will automatically receive your benefit or your spousal benefit, whichever is higher.

How Does Spousal Benefit Work?

Let’s take a look at Sam and Linda’s situation.

  • Sam’s FRA benefit is $2,000
  • Linda’s FRA benefit is $800
  • Linda’s FRA spousal benefit is $1,000

In this example, Sam’s Full Retirement Age benefit is $2,000 while Linda’s is $800. Therefore, Linda’s spousal benefit is $1,000 per month (one-half of Sam’s $2,000 benefit). Linda will now receive either her FRA benefit or her spousal benefit, whichever is higher.

Therefore, when Linda applies at Full Retirement Age, she will automatically receive $1,000 instead of her retirement benefit of $800. The applicant will always receive the greater amount if it does not exceed one-half of the spouse’s benefit.

Spousal Benefit Rules

A spouse cannot apply for/receive benefits unless the primary worker has already applied.

In other words, the primary worker must have already applied for benefits before spousal benefits can be received. Also, the spouse must be at least 62 years old to receive reduced benefits or 66 years old for full benefits.

There are no delayed credits for spousal benefits so your benefit amount will not increase if you delay benefits past your Full Retirement Age.

In other words, if you are 68 years old and planning on filing for benefits, you might as well apply now because they cap out at Full Retirement Age.

2. Divorced-Spouse Benefit

Divorced-Spouse benefits are the same as spousal benefits (see above) IF:

  • the marriage lasted for ten years or more – AND –
  • the person receiving the divorced-spouse benefits is currently unmarried. (Even if the former spouse remarries, if you are unmarried, you can be eligible for benefits.) – AND –
  • you must be divorced for at least two years – AND –
  • the ex-spouse must be age-eligible to receive Social Security (although he/she does not have to be receiving it). This is to protect people from an ex-spouse trying to block benefits.

Can an Ex-Spouse Affect Benefits Paid?

The benefits paid to one ex-spouse will not affect those paid to the worker, a current spouse, or other ex-spouses. Furthermore, benefits paid to one ex-spouse do not affect those paid to the worker, the current spouse, or other ex-spouses.

What If I Remarry?

Currently, if you remarry, you generally cannot collect benefits on your former spouse’s record unless your later marriage ends (whether by death, divorce, or annulment).

In other words, if your second marriage does not last ten years, you can fall back on your previous marriage for benefits, if all other requirements are met.

Born After January 1, 1945?

If you were born on January 2, 1954 or later, upon application, you will automatically receive your benefit or your divorced-spouse benefit, whichever is higher. This law became effective December 31, 2015.

3. Survivor Benefit

Most of us do not like to talk about or even think about death. But wouldn’t you feel better knowing that, if you or your spouse were no longer living, Social Security would help take care of your family?

If you are working and paying into Social Security, some of the taxes you pay go toward survivor’s insurance. In fact, if you currently have life insurance, the value of your private policy is probably less than the value of the survivor insurance you have under Social Security.

How Do I Receive Survivor Benefits?

To receive a survivor benefit, you must meet the following criteria:

  • The couple must have been married for at least 9 months at the date of the worker’s death.
  • To receive full benefits, the survivor must be at full retirement age. (see chapter 3)
  • To receive reduced benefits, the survivor must be 60, or 50 if disabled.
  • If the widow/er remarries before age 60, 50 if disabled, the survivor benefit is only available if that marriage ends.

Note, if you were married at least 10 years and then divorced, there are divorced-spousal survivor benefits available.

Survivor Benefit Stipulations

The amount of the benefit depends on whether the deceased had applied for Social Security benefits. The survivor benefit amount is based on the earnings of the person who died. The more the worker paid into Social Security, the greater the benefits will be.

Social Security uses the deceased worker’s basic benefit amount to calculate the percentage survivors can receive. The percentage depends on the survivor’s age and relationship to the worker. If the worker who died was getting reduced benefits, the survivor’s benefit will be based on that amount.

Qualifying for Survivor Benefits

Qualifying for Survivor benefits depends on:

  • Whether or not the deceased had already filed for Social Security benefits
  • The age at which the deceased spouse originally claimed benefits (the “original benefit”)
  • The age at which the widow/er claims the survivor benefit (the “actual benefit”)

If the deceased received Social Security benefits before his/her Full Retirement Age, then benefits will be limited. The survivor benefit is limited to the bigger amount between the deceased spouse’s benefit or 82.5% of the Primary Insurance Amount (PIA).

However, if the deceased received Social Security benefits after his/her Full Retirement Age, the survivor benefit increases to include delayed credits.

Two Categories of Survivor Benefits

  1. The deceased has filed for Social Security Benefits.
  • Before Full Retirement Age, the benefit limited to the bigger amount between the deceased spouse’s benefit or 82.5% of FRA.
  • After Full Retirement Age, increases the benefit to include delayed credits.
  • If both are already receiving benefits, the widow/er may switch to the higher amount.
  • The deceased has not filed for Social Security Benefits.
  • At Age 60 the benefit is 71.5% of the deceased’s Full Retirement Age.
  • Before Full Retirement Age, the benefit is reduced by early filing penalties.
  • At or After Full Retirement Age, the benefit will equal 100% of the original benefit.

Examples:

When the Larger Wage-Earner Dies

  • Sam & Linda are married
  • Both over full retirement age
  • Sam’s benefit is $2,000
  • Linda’s benefit is $1,000

Sam and Linda are married, and both are over their full retirement age. Sam’s Social Security benefit is currently $2,000 and Linda’s is $1,000.

Unfortunately, Sam dies. As one of the rules indicates, upon the death of a spouse, the widow/er automatically receives the higher of the two benefits. Therefore, Linda’s survivor benefit increases to $2,000.

When the Smaller Wage-Earner Dies

  • Sam & Linda are married
  • Both over full retirement age
  • Sam’s benefit is $2,000
  • Linda’s benefit is $1,000

Now let’s say they are in the same situation as before: They are married, both over full retirement age, and both already receiving benefits.

This time, however, Linda dies. Therefore, Sam retains his $2,000 benefit, as it is the larger of the two.

When a Survivor Benefit is Claimed Early

  • Sam & Linda are married
  • Sam’s full retirement age is $2,000
  • Sam files for Social Security benefits at 62 (75% of $2,000 = $1,500)

Sam and Linda are married and Sam’s Social Security benefit at Full Retirement Age would be $2,000. However, Sam files for benefits at age 62, thereby reducing his Social Security benefit. Because he filed at age 62, he receives 75% of his Full Retirement Age benefit. Seventy-five percent of $2,000 is $1,500.

Sadly, Sam dies. Linda applies for Survivor Benefits and her age is the key to the amount she will receive.

If Linda is 66 years or older, her benefit will be 82.5% of Sam’s FRA benefit amount ($2,000) equaling a survivor benefit of $1,650.

If Linda is 60 years old, she will receive 71.5% of Sam’s FRA. Therefore, 71.5% of $2,000 equals $1,430.

When a Survivor Benefit Claim is Delayed

  • Sam & Linda are married
  • Sam’s FRA is $2,000
  • Sam files for SS benefits at 70, past full retirement age (benefit is 132% of $2,000 = $2,640)

Sam and Linda are married but this time, Sam waited until age 70 to file for Social Security benefits. His Social Security benefit, therefore, is $2,640 (132% of Sam’s Full Retirement Age of $2,000).

Sam dies. Linda’s survivor benefit is equal to Sam’s Social Security benefit of $2,640.

However, if Linda is age 60, her benefit will be 71.5% of Sam’s Social Security benefit ($2,640) which is $1,888.

If Linda is 66 years or older, she will receive 100% of Sam’s benefit of $2,640.

Bottom Line It is easy to recognize the importance of when to begin receiving benefits which impacts the survivor. It is beneficial to delay receiving Social Security benefits to give the survivor more income in the event of the spouse’s death.

Chapter 5: Social Security Annual Earnings Test