Mature Couple Biking at Sunset 47 Percent One will Live 90

Survivor benefit strategies can be complicated, but they can also make a significant contribution to retirement cash flow.


Survivor Benefits: A Complex But Critical Social Security Strategy

  • 7/29/2015

A surviving spouse cannot afford to make short-sighted Social Security claiming decisions. He or she needs to engage in long-term planning that involves all of the couple’s resources and financial affairs. In fact, survivor planning is one of the most important aspects for a couple’s Social Security strategy. Maximizing income for a surviving partner requires the integration of an overall financial situation and the ability to analyze and understand a variety of benefit scenarios.

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Perhaps the greatest opportunity that Social Security offers retirees is allowing a high-earning spouse to maximize his or her retirement benefit by delaying it until age 70. Doing so also maximizes the survivor benefit for the surviving family member. This strategy provides the couple a higher income while husband and wife are alive, and it also gives the surviving spouse more income if the one with greater income dies first.

For an individual to provide a spouse with survivor benefits, he or she must have at least 10 years of work history or must have worked for at least six quarters during the 13 calendar quarters prior to death. The surviving spouse may be able to maximize his or her lifetime benefit by sequencing receipt of survivor benefits with his or her own retirement payments.

As life expectancy increases, so does the need for survivor planning

Government researchers tell us there is a 47 percent chance that one member of a 65-year-old couple will live to age 90. And that percentage has been steadily rising. Outliving your money is a very real possibility without disciplined, goals-based planning that considers all of the strategies for maximizing Social Security benefits for yourself and your spouse. There are always factors that will be beyond your control, but Social Security is one variable that couples should always make a part of their meaningful retirement plan.

Life Expectancy Spouse Survival

How survivor benefits work

As you might expect, individual Social Security retirement benefits stop at death. However, if two people have been married at least nine months at the date of death (except in the case of an accident), a survivor benefit is available to the widow or widower.

Survivor benefits are based on two things:

  1. The age at which the deceased spouse originally claimed his or her benefit.
      • If the deceased person claimed before full retirement age (FRA), the survivor benefit will be limited to the higher of that person’s actual benefit or 82.5 percent of the FRA benefit.
      • If the deceased person passed away prior to FRA without taking his or her retirement benefits, the survivor benefit will be equal to the deceased person’s FRA benefit.
      • If the deceased person lives past FRA or claims after FRA, the survivor benefit will include all the maximized benefits accrued.
  2. The age at which the surviving person claims the survivor benefit.
      • If the surviving person claims before FRA, the survivor benefit will be reduced.
      • If the surviving person claims at FRA or later, his or her survivor benefit will equal 100 percent of the deceased spouse's benefit (survivor benefits do not appreciate past the beneficiary’s FRA).

An example of multiple survivor benefit options

Jack has an FRA benefit of $2,642. His retirement benefit would be $1,981 at age 62 or $3,487 at age 70. Jack is older than Jane, whose FRA is 66.  

Jane's Application Age
Jane’s Survivor Benefits
Jack claimed at 62 Jack died young Jack claimed at 70
60 71.5% of $2,642 $1,889 71.5% of $2,642 $1,889 71.5% of $3,487 $2,493
61 76.25% of $2,642 $2,014 76.25% of $2,642 $2,014 76.25% of $3,487 $2,658
62 81% of $2,642 $2,140 81% of $2,642 $2,140 81% of $3,487 $2,824
63 82.5% of $2,642* $2,180 85.75% of $2,642 $2,265 85.75% of $3,487 $2,990
64 82.5% of $2,642 $2,180 90.5% of $2,642 $2,391 90.5% of $3,487 $3,155
65 82.5% of $2,642 $2,180 95.25% of $2,642 $2,516 95.25% of $3,487 $3,321
66 82.5% of $2,642 $2,180 100% of $2,642 $2,642 100% of $3,487 $3,487

*Benefit is maximized at 82.5% of FRA benefit at Jane’s age 62 years and four months.

An individual with access to a retirement benefit for his or her own work record and access to a survivor benefit for a spouse’s (or ex-spouse’s) work record can start receiving his or her own benefits at age 62, then switch to a survivor benefit at age 66. Or that person could start the survivor benefit at age 60 and switch to his or her own benefit at age 70.

Unlike in previous articles, where we talked about coordinating retirement and spousal benefits, the receipt of retirement or spousal benefits (even before FRA) does not affect the amount of the survivor benefits available. Therefore, a retiree can take a smaller benefit initially while another larger benefit grows unaffected, waiting to be taken at a later date. This will be the permanent benefit received into old age.

How we can help

Married couples need to coordinate their Social Security benefits into an optimized strategy based on the projected longevity of the husband and wife. Of all of the benefit strategies to be coordinate with a spouse, survivor planning can be one of the most complicated; the chosen strategy can make a significant contribution to retirement cash flow. Always consult an investment advisor and tax professional to assist in analyzing your retirement needs and associated risks.