Regarding Social Security, what is the difference between spousal benefits and survivor benefits?
The good news is that most people will receive benefits from the Social Security system. The bad news is the Social Security program is a very complex system. There are a lot of different rules and strategies available as to how and when to elect benefits, as well as many choices to make on different options. In order to maximize your benefits and get the most out of the system, you simply must know and properly understand all the rules and options and how to apply them for your benefit. Some of these options and strategies come into play when one spouse passes away.
When someone dies, it is important to understand the differences between spousal benefits and survivor benefits. Although both words start with an “S,” based on the long-established rules in the Social Security system, there is almost no similarity between survivor benefits and spousal benefits. So, let’s look at the differences.
Spousal benefits come into play when one spouse’s work credits are less than half of the other spouse or when one spouse has no credits at all. This is a big benefit in the Social Security system because even though one spouse has not worked or has worked very little, they are able to collect a Social Security check off of the other spouse.
Spousal benefits can start as early as age 62 and are capped at 50%, which occurs at full retirement age. Let’s take a look at an example. Let’s say John has worked a lot in his lifetime, and his full retirement age benefit is $2,400 a month. If he was married, then his wife would qualify for at least a $1,200 a month payment at her full retirement age even if she never worked or paid any payroll taxes during her lifetime. Now, if the spouse wants to collect a spousal benefit early, that is an option as well, but it will be less than 50% of the working spouse’s benefit. Of course, if both working spouses have a lot of Social Security credits, then both spouses would get their own higher amount if it is more than a spousal benefit.
Now, survivor benefits are quite different. When one spouse passes away, the surviving spouse steps into the higher of the two’s benefit. So, the lowest Social Security check will be lost, and the surviving spouse keeps the highest benefit. Survivor benefits can start as early as age 60. So, for example, let’s say that John dies at age 67 and was receiving $3,000 a month. His spouse, let’s call her Linda, would get John’s benefit and lose her own, or she would keep her own if it was higher than John’s. However, there may be a way for Linda to take John’s benefit for a few years while her benefit continues to increase, and then switch to her own benefit once it gets higher than the survival benefit.
It is critically important to educate yourself about Social Security and get as much information as possible about all the different rules, options and strategies. If you want to maximize your benefits, you have to do this. The definitive answer is always based on several factors, which will be specific to your unique and personal situation. If you would like to ask questions about your specific circumstances, please send me an email or give me a call.