Chris Stein, CFP®
Clarification On Claiming Social Security Survivor Benefits
A reader from Delaware has a question about claiming Social Security survivor benefits.
"My cousin's ex-husband was born in October 1954 and passed away in 2015 at age 60. They were married for more than ten years when they divorced. She will be 62 in September 2021 and has never remarried. He would have been eligible for Social Security benefits but passed away way too young. Is my cousin eligible to claim a survivor benefit? When can she claim? When should she claim? She will also be eligible for her own Social Security retirement benefit, but her ex-husband's benefit will be higher. Also, she is in very good financial shape and won't need this money to maintain either her Minimum Dignity Floor or fun spending. She has two grown children, so I'm sure she can find a good use for it, though."
I'll be able to help with a few specific answers, but some will have to remain a little up in the air because we don't have enough details here.
The critical question is whether your cousin qualifies for claiming a survivor benefit. Based on what you've told us, the answer is "absolutely." Here's the rule: for purposes of claiming Social Security, a person is essentially considered to have the same eligibility as a spouse, even if divorced, as long as that person was married to the deceased for more than ten years.
This rule is relatively recent. Initially, when people divorced, the spouse got thrown to the wolves. A lot of the benefits were taken away. Looking back at the 50s, 60s and 70s, many stay-at-home spouses didn't have their own Social Security record. They would get divorced and would find they had nothing. They were left in a financial bind. So the government passed a rule that says, as long as your marriage lasts for at least ten years, you don't lose or give up your Social Security benefit as a spouse, even if you are divorced.
So let's look at your cousin's case. You mentioned she was "married 10+ years" to her ex-spouse, So, she has as much right to a survivor benefit as any other ex-spouse under similar circumstances. (Plus the spouse he was married to the day he passed away.)
All of a deceased person's spouses and ex-spouses who qualify have the potential of claiming the full survivor benefit on that person's record. One person claiming does not reduce what another can claim. They don't all share a single survivor benefit; they each get their own. I have no way of knowing if there were other exes or if this person had a spouse when he passed, but none of that is relevant.
Because your cousin had been married for at least ten years, your cousin's spouse – who died in 2015 – left her a survivor benefit that she can claim as early as age 60 (or as young as age 50 if she is disabled). Your cousin is about to turn 64, so she's been eligible to collect a survivor benefit since September 2019. But it will be a reduced survivor benefit unless she waits until she reaches Full Retirement Age (FRA) between age 66 and 67.
Whether someone is filing as a spouse or ex-spouse, what is unique about survivor benefits is that the pool of money that pays out a survivor benefit is considered separate and distinct from the one that pays your Social Security retirement benefit. This allows you to do something you cannot do with spousal benefits. (Remember, spousal benefits pertain when people are still alive.) Survivor benefits can be claimed independently of claiming your own retirement benefit, so you can decide strategically when to turn on each one.
Your cousin could turn on the survivor benefit right away, although it will be reduced because of her age. (At nearly 62, she's below her full FRA.) She could then let her own retirement benefit grow to its maximum at age 70.
That's often an attractive approach if her retirement benefit at age 70 would be bigger than the survivor benefit will ever be. I haven't been given the numbers, so it may or may not be the case. You mentioned that the survivor benefit was bigger than your cousin's retirement benefit but didn't clarify if it was bigger than hers at age 70.
If hers will never get as big as the survivor benefit, sometimes it makes sense to turn on her retirement benefit first but wait to turn on the larger survivor benefit until she reaches her Full Retirement Age.
The goal is this: whichever benefit you end up with in the long run, you want to make that one as large as you possibly can. So it should be the larger of your cousin's retirement benefit or her survivor benefit.
Now, it may not seem that critical in her case. You mentioned she doesn't need this money to satisfy her expenses; this is just extra money. But I think it's worth calculating which one should be claimed first. It's not complicated to figure out what will put more money in her pocket in the near term and possibly in the long term.
She may not need the extra money in the near term, so it's not a priority. But she could use it to help kids right now. It could be passed through and used to gift to kids, fund a life insurance policy, or contribute to 529 educational plans for the grandkids. There are all sorts of uses for it if one doesn't "need it."
But without more details, I can't say for sure which strategy makes the most sense. Yet, your cousin's approaching 62 in September, and I can't think of a scenario where it would make sense to delay both income streams further. So instead, one of them should be turned on. The question is: which one?
That answer would depend upon the specific amounts we're dealing with here.
In summary, while I can't answer the "best strategy" question without more information, I can confirm she absolutely has the right to claim a survivor benefit. She can strategically decide to claim one income stream before the other. The one that is not turned on will be treated as if nothing's happened. It will continue to increase in size by delaying.
Some thought does need to go into this, and it should be done soon because, after 62, she is sure to be leaving money on the table. In hindsight, it might have made sense to turn on the survivor benefit two years ago, when she first could, but you can't go back and do that now.
So, run some calculations to figure out which income stream she should turn on. Then let Social Security know and proceed.