In my beloved Agatha Christie mystery books, a few of the widowed characters have a pension from their deceased husbands that allows them to eat at darling tea shops, buy good linens, and participate in solving murders. Some of the more-desperate, pension-less, older widowed lady characters, however, actually turn to committing murder. In 2020 America, few of our spouses and few of us have pensions from years of work. The “pension” on which most of us rely is Social Security.
Social Security “claiming” (or the history of it since recent laws changed the rules) is a series all its own, but in this article, we’ll touch briefly on a few points to consider about Social Security when you’ve lost your spouse. In our series on how to manage finances after the death of a spouse, we’re exploring tips from FINRA, a reliable financial source.
Many aspects and terms of Social Security are confusing. The following pertain particularly to widows.
Lump Sum Death Benefits
People are often confused about the Social Security lump sum death benefit and the survivor benefit. The lump sum you get when your spouse dies is $255, an amount unadjusted from its inception in 1935. As you well know, $255 won’t help with much, but it’s still money you will want to be sure to get; the funeral home should notify the Social Security Administration, but if not, you’ll want to add this to your already long to-do list.
Survivor’s Benefit
When Social Security was implemented in the 1930s, many American women lacked a formal, paying job. Once Social Security started, retired couples received money back from the Social Security system based on money the man earned during his working years. Then if the man died before the woman, she could collect a survivor retirement benefit based on the man’s job on until she died. Today, most of us have a work record that we paid in to Social Security and thus have our own benefit. However, as discussed below, history hasn’t changed that much – women still make less and thus tend to have lower benefits.
Women’s Earnings
George Washington University’s Face the Facts USA points out that “the average female retiree on Social Security gets a monthly benefit $300 smaller than the average male retiree. Because retirement benefits are tied to average lifetime earnings, and women have tended to earn less than men, the average monthly Social Security retirement benefit is $1,023 for women, $1,323 for men (2013 data). The difference -- $300 – is about what the average American household spends on groceries per month.” The average benefit in 2020 is now about $1,471, but the difference between men and women hasn’t changed.
Just One Benefit Per Person
I’ve also heard confusion about whether you get your own benefit AND your deceased spouse’s. Unfortunately, you only get one. When you are both alive, you can draw your own benefit amount OR half of his amount. When he is gone, you can draw either yours OR his full benefit, whichever is higher.
The Importance of Delaying to Full Retirement Age – If You Can
If you can wait until Full Retirement Age (FRA) to draw benefits, you’ll earn a significantly higher monthly benefit for life rather than consigning yourself to the lifetime reduced amount you get when you start collecting at 62. Sometimes you have to start because you aren’t working and have no other income source, but if you can wait, it’s almost always better financially.
Claiming “Strategies”
For a number of years, a loophole allowed couples who both had worked and thus were entitled to their own Social Security retirement benefits to use clever claiming strategies to maximize their total lifetime benefits. Most of those strategies were eliminated in recent changes to the law.
We’ll cover FINRA’s tips for widows in the next few articles. Tip 5 covers other types of benefits and how to get them. Thank you for joining me.
Kathryn Hauer, a Certified Financial Planner ™, adjunct professor, and financial literacy educator has written numerous articles and several books including the "11-Step, DIY, Comprehensive Financial Plan Workbook" and "Financial Advice for Blue Collar America." She works to help clients and readers understand and act on complex financial information to keep them and their money safe. She functions as a strong advocate and guiding light for her clients as they move through a murky and unfamiliar financial world.