TRANSCRIPT
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#37 - Top 5 Questions on Social Security Survivor Benefits
Eric Blake:
Welcome to another episode of the Simply Retirement Podcast. I am your host, Eric Blake, practicing retirement planner with over 25 years of experience and the founder of Blake Wealth Management, where we want to empower women to live your retirement on your terms. On today's show, we're going to answer the top five questions we get from clients, from perspective clients, and from our audience on Social Security survivor benefits. Joining me on today's show to talk through this important topic is my amazing producer, Wendy McConnell. Wendy, how are you?
Wendy McConnell:
I'm good. Thank you for that lovely introduction. I love to be. Of course
Eric Blake:
You are. Hey, you keep the wheels on is much better than I can, so it's all good.
Wendy McConnell:
So you mentioned we're going to talk about survivor benefits, right?
Eric Blake:
Yeah. With our audience, we deal with that a lot. Unfortunately, it's a situation where the statistics are that 56% of social security beneficiaries 62 years or older are women. So when you're looking at these statistics, it is unfortunately the highest probability that the woman is going to outlive the man. And so when we start talking about survivor benefits, there's a lot of things that we need to be aware of leading up to that of course that will ultimately impact your success in retirement. So I want to make sure that we get these questions answered, help people in making the most effective decision for their situation as well.
Wendy McConnell:
So let's start with who is eligible for survivor benefits.
Eric Blake:
So I want to focus primarily on, obviously we're talking about our audience, women that have either been divorced or widowed. I want to primarily focus on those, but I do want to touch on a couple of other areas that may be a little bit surprising to folks. But when we're talking about eligibility and we start talking about spouses, so you're currently married, your spouse passes away as long as you have been married for at least nine months. You are eligible for a survivor benefit if you're currently married. If you then say, at what age could I start benefits, you could start as early as age 60 or even as early as age 50 if you are disabled. So those are age wise for if you're currently married, spouse passes away, that's what you're eligible for or that's when you're eligible. If you've been divorced, you can still be eligible for survivor benefits based on an ex-spouse.
However, here are the key numbers you have to be, have been married for at least 10 years prior to the divorce, and again, those same ages apply. So you have to be at least 60 years old to apply for survivor benefits or you have to have been disabled and you can receive benefits as early as age 50. And we're going to talk a little bit more about that here in just a little bit. But again, keeping in mind the earlier you start any benefit, whether it's your own or a survivor benefit, it is going to be reduced if you start before your own full retirement age. So those are the key. As far as our audience, those are the two keys I wanted to talk on, but there are some other ones that people may not be aware of. I don't want to spend a whole lot of time, but I do think it's important because these days with family, there's a lot of things, different family situations that we might experience.
So for example, if you have children and you pass away, then your children may be eligible. That's also if you happen to be, if you're in your fifties or sixties and for whatever reason, maybe you're taking care of your grandchildren and they are legally your, you've legally adopted them, they may also be eligible in that circumstance as well. And one other that I think is really critical to be aware of based on just the risk we see today, healthcare people living longer, the chances that a parent that may be living with their children, their adult children, so the children themselves may be in their fifties or sixties, the parents may be in their eighties. Well if the child, the adult child passes away and they are financially responsible or that parent is a dependent of that child who passes, they actually could potentially be eligible for social security survivor benefits in that situation as well. So I just wanted to touch on that because it's one of those that not many people are aware of where it's actually a parent that could be receiving survivor benefits based on their adult child.
Wendy McConnell:
Okay, so in the situations that you are talking about that you're focusing on, how would we go about applying
Eric Blake:
To apply for benefits? There's a couple of really key things to be aware of. Number one, to apply for survivor benefits if you have been receiving your own benefit first, or if you have not been receiving any benefits, you want to schedule an appointment. It could be a phone appointment, it could be an in-person appointment, really depending on what you feel like you're most comfortable with. But you have to schedule an appointment to go in and talk to somebody and apply for those benefits rather than being able to do it online when talking about your own benefit and you just say, Hey, I've retired, I'm going to apply for social security. All that can be done online, but with survivor benefits, you must schedule an appointment. You must talk to somebody to go through that application process. Now, one thing that also can work in your favor is if you are receiving spousal benefits.
And if you go back into listen to episode 24, we did a whole episode on spousal and ex spousal benefits, but if you're receiving spousal benefits or spousal benefits at the time your spouse or ex-spouse passes, you may automatically be moved over to a survivor benefit. But again, you want to be aware that it should be coming. And if it doesn't, then again you want to contact the Social Security administration. But that is a situation where you might automatically get moved over to the survivor benefits. If you're receiving a spousal or spousal benefit at the time the other spouse passes away. So the big thing is just you can't do it online. You cannot apply for survivor benefits online. You have to go into the office or schedule a phone appointment.
Wendy McConnell:
Do you know why do they make you take that extra effort?
Eric Blake:
It's under those circumstances where, because even though it might be a spouse or especially an ex-spouse, the information that they can provide or share, they're not just going to do it. They're not going to allow you just to apply for benefits online based on somebody else's record because actually there's fraud. There's all kinds of potential issues that could arise. So it's much better. The other thing is documentation. So when you apply, you have to provide, hey, in most cases they're going to be notified of a death already. If the spouse passes away, they're already going to be aware of that. But in the circumstances of, hey, do I might have to provide a marriage certificate or I might have to provide a divorce decree that showed, yes, I was married to this individual for more than 10 years, I should be eligible for survivor benefits. So part of his documentation and part of it is just avoiding those scammy type issues.
Wendy McConnell:
Yeah, that's understandable. But boy do we hate going into the office.
Eric Blake:
It's one of those things, hopefully you just have to do it once. But it is kind of one those things that it is so important that I always talk about survivor benefits or security benefits in general being so critical, it's such an undervalued aspect of retirement planning and the survivor benefits that you are eligible for. You don't want to get every dollar, you don't want to leave any money on the table. So it's just one of the things, hey, you got to do what you got to do in this situation.
Wendy McConnell:
So what benefits are surviving spouses entitled to?
Eric Blake:
So this is really where the planning component comes in. So the survivor benefit that you may be eligible to receive is going to be based on 100% of the deceased spouse's benefit, either at their full retirement age if they had not started benefits yet. Let's say somebody, they're 62, they haven't started social security yet, they're going to weigh their planning to rate until full retirement age, but they pass away whatever they would have been eligible for at full retirement age. That's what you would be eligible for up to that as a maximum. I'm going to clarify that here in just a second as well. So that's the maximum would be what they would've been eligible for at their own full retirement age or what they were receiving if they had already started benefits. So if they were receiving social security benefits at the time they passed away, you would be eligible for up to that amount as a maximum benefit.
And that's going to be really be the same case, whether it's spouse or ex-spouse. So the eligibility, the amount that you're going to be eligible for doesn't change whether you're divorced or you're still married. That's going to be the benefit is going to be, again, full retirement age benefit if they had not started yet or what they were receiving at the time they passed, you used the word up to is there a reason? Absolutely there is. I, I'm glad you asked that. So up to meaning, again, back to the point of any time you start social security benefits prior to your full retirement age, whatever you would've been eligible for is going to be reduced. So I talked about earlier, remember I talked about that you are actually eligible for a survivor benefit as early as age 60, but if you started 60, it's going to be significantly reduced from what it would have been had you waited till full retirement age.
So that's why when we talk about maximum, that's why that's so critical is just understanding that the earlier you start benefits doesn't mean you shouldn't. But that's really again where the planning comes in. So what are you evaluating your cashflow situation? Making sure you understand what your income sources are going to be so you can make an educated decision about, well, if I need to start, then you just have to start. If I don't have any other sources of income, maybe you have to start at 60 or 62 or something earlier than full retirement age. But if you can and you can wait until full retirement age to get the maximum benefit, in many cases, that's going to be to your advantage. It's just not always possible.
Wendy McConnell:
Can I switch from my survivor benefit to my own social security later?
Eric Blake:
That is a great question. It's one of the most confusing topics that's still out there. And part of it is because the Social Security Administration manages to make it very confusing. So not long ago, there were some rules that were in place that allowed you to do a little more maneuvering, we'll call it when you are making social security decisions in that you could delay my own benefit and take a spousal benefit as well, and all these other different kinds of rules that's gone away. So we won't spend a whole lot of time on that in this particular episode. But the fact is, yes, if you makes sense, you do have the option of switching from a survivor benefit to my own benefit later or from a survivor benefit to my own benefit later. And it really, again, that's where the planning comes in and understanding that, hey, if I'm in a cashflow need, if I need money, I might say, Hey, I'm going to go ahead and start my survivor benefit at 62, but would it didn't allow me to delay my own benefit to allow it to grow, to earn those credits. So every year you can delay your own. That's about an 8% increase. So if I could start one maybe earlier, if I needed the money and switch to a bigger benefit later, that's going to be in your favor as well. Again, depending on which one is greater. So whether your benefit or the survivor benefit is greater, ideally, again, not everything is ideal, but ideally you want to wait to take the larger benefit last. That's really typically the key thing to be aware of.
Wendy McConnell:
And typically I would think in the case of women, most of the time the survivor benefit would be probably a larger amount than our own. Again, depending on the situation. But just with the fact that men typically make more money
Eric Blake:
Historically, yes, but again, these days that's not always the case. As again, as women are earning more money and being in more important positions, that's not always the case. And there are definitely situations where it may not be, but that's where you want to make sure, and we'll get to some of these things in the action items. Zoo is saying, okay, how would I go about making these decisions? But number one, you got to know that it is an option. The fact that you can switch as can be huge. If you just said, well, I'm just going to take my benefit, and Social security administration is not going to call you and say, Hey, guess what? You could switch over if you want to. This benefit's going to be bigger, it'd be better in your better interest to do so. They don't do that. You got to know. I know. I dunno. What's wrong with those folks? Right.
Wendy McConnell:
Okay. So what happens if I get remarried?
Eric Blake:
This is a big one, and this is where again, where I always have to distinguish between spousal or spousal benefits and survivor benefits, whether those survivor benefits are based on an ex-spouse or a current spouse. If you intend to get remarried, do so after age 60, you could do it, do it after age 60. So when we're talking about survivor benefits, where this is different. So back to ex-spouse and spouses real quick, if you get remarried, you are no longer eligible for any type of benefit from a previous spouse, from an ex-spouse, you cannot get anything survivor benefits. It's a completely different story as long as it happens after age 60. So if you're going to get remarried after you've lost a spouse, do so after age 60 because as long as you do that, you are still eligible for a survivor benefit. So I always think it's good to go through an example of this situation.
So let's say you are married, husband passes away 55, as long as you've been married to that ex-spouse for at least 10 years and he passes away when you're 55, you're eligible for survivor benefits as long as you don't get remarried before the age of 60, right? So if you get remarried 58, that's it. You're no longer eligible for any survivor benefits off of a previous spouse, whether you had been married at the time or divorced at the time. So if you get married at 62, 63, 61, as long as it's after the age of 60, you are still eligible for a survivor benefit off of a spouse that passed away if you're still married when they passed away, or again, if you had been divorced, you can be remarried. So if you're married to at 62 to a new husband and you're eligible for benefits, you could start those benefits based on that, the previous deceased spouse.
So that's where the remarriage thing really, again, from my planning perspective, a lot of times I think about my grandmother's situation and she never remarried, but she was 62 at the time my grandfather passed away. Nobody knew what she was going to do after that. That's a long time. She's got a long time just being by herself. But those circumstances, they do happen. People get remarried in their seventies or eighties. It happens, but you want to make sure you understand what the rules are when it comes to survivor benefits with social security, it can be really critical, again, because in most cases, women out live the men, it could be there's situations where a woman could be eligible for multiple survivor benefits just depending on the circumstances. Alright, so the last thing I want to do is now that we've kind of gone through those five key questions, again, those are the most frequent questions that we hear is again, around eligibility.
When should I start, what happens if I get remarried? All those types of things. But I think the really critical part when it comes to social security, and this is where we're talking survivor benefits, your own benefits, any of the above is making sure that there's certain things you should do to make sure you've got the most effective plan possible when it comes to when do I file, how do I file, what am I eligible for? All those good things. And I think the first thing I'm going to suggest, and this applies for women specifically, if you're married, be part of the conversation around when you are going to file for social security benefits. And what I mean by that is when we know the statistics are that the women typically outlive the man, if you allow your man, your husband to start social security benefits earlier than what he may should or may need to, in most cases, it's likely going to be the wife that's going to be the most impacted by that.
So we've heard situations where the husband just is done, they ready, they're ready to retire, they're ready to get out of the workforce. So they start social security benefits at 62. Well, if they are the higher earner in that situation, that's also going to be the survivor benefit, meaning that if they started 62 versus say 67 or even 70, again, think about that 8% increase those credits every single year will add 8% to his benefit. So you think about eight years times 8%, that's a pretty big bump. So when you're thinking about what happens if he were to pass away and what you're going to be left with, don't let the man make the decision on their own be part of that conversation. Honestly, I think I could make the argument a pretty good argument that the wife should be the responsible party when it comes to making that decision because again, it's more likely than not she's going to be the one that's going to be impacted most negatively if the husband does pass away first, which again, that's what the statistics tell us.
So we talked about earlier that if you do have to apply for supplier benefits, that you need to schedule an appointment to go in and apply for those benefits. Well, the first thing you want to do is if you think you are eligible or you're going to be eligible for a survivor benefit, if you've been widowed, contact the Social Security Administration as early as possible to get an estimate of make sure you know what your benefit is first, but get an estimate of what that survivor benefit would be because you have to have that information in order to make a decision, right? Do I start my benefit first and allow my survivor benefit to continue to grow? Do I start my survivor benefit first and allow my benefit to continue to grow? And that's really again, where that planning comes in. You have to know the information in advance as if you can, again, if it's a surprise or it's later in life, it may not be possible.
But knowing those information, if you think you're going to be eligible, make sure you know what those numbers are. Because a critical aspect of retirement planning is saying, okay, with survivor benefits, I talked about the maximum survivor benefit is full retirement age for the deceased spouse. Well, the maximum benefit for you as the surviving spouse is 70. So that's a big difference in saying, okay, if I could start the survive benefits first and delay my benefit all the way to age 70, that might make a huge difference. Again, it always depends on what your benefit is, but that can make a huge difference in the money amount of money you have available to cover your expenses when you're 80, 85, 90. And that's really where it becomes difficult for people to really comprehend is thinking that the decisions I make at 50, at 55, at 60, at 62 are legitimately going to impact my financial situation when I'm 80, 85, 90. And knowing that, okay, if I could receive the maximum benefit possible, I could wait as long as reasonably possible to start my social security benefits. That's going to make a huge difference when you're talking about being 85 or 90 because you have cost of living increases and things like that that are going to continue to grow that benefit over time. And again, that can make a huge difference.
Wendy McConnell:
So social security should know what the amount is. You can call them and find that out before you determine whether you're going to go in and apply for them.
Eric Blake:
You ought to have documentation, again, depending on the circumstances. It may be you need a marriage certificate, you need a divorce decree, you need a death certificate. There's information you're going to need depending on whether it's an ex-spouse or a current spouse, information you're going to need in order to get that information. But again, you want to probably call in and talk to one of their specialists just calling in. You may not get the right answer, you may, I hate this. And we talked about this, what was it, episode 32, I think it was, where we talked about what happens when you call the Social Security Administration. You don't always get the right information, and it's unfortunate, but if you know what you're looking for, if you know what information you're trying to get and you know what your questions are, what kind of answer you should be expecting from that, you're going to be much better prepared to get the right information or to know who to ask for a specialist, make sure that person knows what they are doing and you hate to say that, but it's reality.
The other thing then we want to do is make sure that we coordinate your social security filing strategy with your other income sources. Always you hear your friends, there's they the big day out there that says, oh, you need to start as soon as possible, start at 62 because you don't know how long you're going to live. And yeah, that makes all the sense in the world if you knew you were going to pass away when you're in your seventies or your sixties. But again, that's not necessarily the case. We talk about life expectancy of you are 62 or you are 65. There's a pretty solid chance you're going to be living into your mid eighties or even early nineties if not longer. So listening today is always, is not typically the best social security filing strategy. But the part of that comes with knowing what other income sources do I have?
Well, if I say, okay, well yeah, I could have started at 62, but my maximum benefit is age 70 or my maximum survivor benefit is age 67. I want to delay this. I can get the most I can from the social security system. But the only way to do that is say, okay, well, if I've got from 62 to 67, where is my income going to come from? Do I have enough investment assets to draw from to cover that gap? Do I need to work a little bit longer than what I would really like to, or did I need to make sure? So if I get a income gap to fill, how am I going to go about doing that? What other income sources do I have? Employment, investment assets, pension? What are those sources of income that I can use to fill that gap if I do want to delay my social security benefit as long as reasonably possible?
So that's a big action step there. That's action step number three, and I'll also say action. Step number four is if you need to or if you want to work and you have started social security benefits, you must understand the earnings test. And this is one of those confusing topics when it comes to social security. Why, if I'm receiving social security, why do I have to worry about getting my benefit reduced? And it's just the reality of the situation. If you start your social security benefit, whether it's survivor benefits, your own benefit or a spousal benefit, if you are working before full retirement age, you potentially could have a reduction in your benefits because you make too much money. Now, as I always tell people, it's not a reason not to do it if you need the money, there are situations where you just say, Hey, if I can make X amount and that's going to cover all my needs, then I will have to just sacrifice the social security benefits for a short period of time.
The other thing I'll touch on right here is that you don't lose the benefits. So the earnings test doesn't say, well now Uncle Sam or in Social Security Administration, now they just get to keep my money. That's not the accurate situation. So actually happens is those funds, if you have to pay back some of your social security from say, 62 to 67, those dollars actually just get recalculated into your benefit at full retirement age, which for most of us now is 67. So if you're born in 1960 or later, your full retirement age is 67. Well, if I had money taken back from me in my 62, 63, 60 4-year-old working years, then that's going to get just recalculated back into your age 67 benefits. So you will get the money. It just might take you longer than what you would like. But it is important that if you're going to take Social Security and continue to work, make sure you understand those earnings test rules.
Last but not least is talk to a professional that understands the social security rules. Not all financial advisors have experience working with the Social Security eligible clients and more specifically clients that will potentially be eligible for survivor benefits. Understanding that there are different full retirement age benefits or maximum age benefits that's so critical to making the right decision. And unfortunately, you also can't always trust the Social Security Administration. We've touched on that. We actually did a full episode on that. The fact that you can't always trust the Social Security Administration to provide you with the right information. Well, if you've got a Social Security Administration that doesn't give you the right answer, you got a financial advisor that doesn't understand all the benefits either. You got a perfect storm. So make sure that you talk to folks that you feel are confident in getting you the right information so that you can make a good decision based on your circumstances. So those are the five action items that I would suggest when it comes to Social security survivor benefits and just social security in general. Be informed, be educated, talk to a financial professional that understands how all these rules work so that you can say, yes, I'm making the best decision that I can under my particular circumstances
Wendy McConnell:
And take advantage of Social Security. Everybody, like you said, people are just discounting it. It's something to count on.
Eric Blake:
Absolutely. Yeah, you've been putting money in for the last 50 years or so, whatever it might be. You want to get as much out of the system as you can, but the only way to do that is understand what the rules are, what are the filing strategies, and making sure that you understand what you are eligible for, and then making sure you're making the best decisions possible. Well, excellent. Wendy, thank you so much for joining me today and going through all this critical topic from a planning perspective. It is, again, it's critical. We talked about all these different action items, different things you can do. Biggest thing I would say is just take action, making sure that you get yourself educated, but also I want to make sure that you please follow and share the show to learn more about our firm and how we can help women make these types of decisions, help you get educated on your social security filing strategies. You can visit us at www.blakewealthmanagement.com. We will see you again on the next episode of the Simply Retirement Podcast.
In the meantime, please remember, retirement is not the end of the road. It is the start of a new journey.
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