No one wants to plan the death of a loved one. But losing a spouse can be a financially vulnerable time for retirees, and understanding how your future can be affected is important.
A primary consideration for many retirees is Social Security, and your benefits may change when your spouse passes away. Here’s what’s possible, and how to prepare.
Basics of Social Security survivor benefits
Surviving spouses can receive survivor benefits. A surviving spouse can collect these benefits before age 60, but if they collect them earlier, the benefits are reduced. They may be able to receive full survivor benefits – up to 100% of their spouse’s benefits – at full retirement age, 66 or 67. There is an expectation. For example, a surviving spouse may be eligible for benefits at any age if they are caring for a child younger than 16 or with a disability.
If you already receive benefits based on your spouse’s earnings, the Social Security Administration will convert your payments into survivor benefits. If you’re already getting benefits but they’re based on your job, managers say call or visit.
“We will check to see if you can get more money as a surviving spouse,” she wrote in a recent letter. “If so, you’ll get a combination of benefits that equates to a higher price.”
In most cases, a couple must be married for at least nine months for the surviving spouse to be eligible for the survivor benefit, although there are exceptions for accidental deaths. Also divorced couples may qualify if they have been married for at least 10 years.
How to maximize survivor benefits
The Social Security Benefit for the highest earner sets maximum survivor benefits. The longer they wait to receive Social Security, the higher the benefit.
That means your higher-earning spouse may want to wait to claim Social Security until age 70 — though you should consider your family’s specific situation. A spouse with a lower gross income can claim Social Security earlier. This method for spouses who want at different ages is called the “separation strategy.”
The income gap and how to close it
It’s not fun to have these kinds of conversations, but planning for a “survivor’s income gap” — the drop in income when one spouse dies — from the first day of retirement can leave couples well prepared for worst-case scenarios. Even with the survivor benefit, the surviving spouse will have to deal with not having both elements of spousal benefits in the household income.
Some people choose to get life insurance that can cover lost Social Security income. But remember, the more money you save while working, the more options there will be when retirement approaches.
Getting clarity on your financial situation can help you act now instead of being caught off guard. The Social Security website provides calculators to determine how much money you will receive, including survivor benefits. This information can help you and your spouse plan for the future.
