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  • Writer's pictureChris Stein, CFP®

Social Security and A Sisters Ability To Claim A Benefit

A reader in Georgia asks a couple of questions about his sister’s ability to claim a Social Security benefit.

“My question is about my sister in New York, who, I believe, has received bad advice from an advisor. Please help me clean up some of the issues. “My sister divorced her husband of 20+ years, and he later passed in 2021. Her “advisor” told her she was not eligible for Social Security on his record and told her she could only claim her Social Security at her Full Retirement Age (FRA). My sister was born in August 1957. Her own FRA benefit will be $1,500, and her deceased ex-husband’s FRA benefit is $1,300. She still works, earning under $50K per year and plans to continue working past her FRA. I believe that she can collect her full survivor benefit of $1,300 starting in October of 2023 when she reaches age 66 and 2 months. Would 66 and 2 months be considered her FRA for the earnings test, or will that still be her retirement FRA of 66 and 6 months? This strategy will allow her to get paid to wait until age 70 when she can take full advantage of her delayed retirement credits on her own work record.”

I think your sister should hire you as her advisor because you’re far more knowledgeable about Social Security issues.

Let’s look at a few things. First of all, because she was married for over 20 years before divorcing, she is eligible to claim on his record, despite the divorce. People who have been married for at least ten years – counted to the anniversary date – benefit very similarly to still-married spouses. So she has many of the benefits available to her that she would have had if still married. The fact that her ex-spouse is deceased opens other opportunities.

The question becomes whether there’s a strategy that would benefit her by incorporating her survivor benefit into her overall claiming. You’re on the right track, understanding the tradeoff between claiming early and delaying to receive larger payments. By waiting past age 62, which is the first age at which someone can claim a retirement benefit, you forgo those early payments in exchange for higher benefits for life once you do turn the benefit on – with the possibility of waiting up to age 70 and receiving additional deferred retirement credits.

In cases like this, your sister can do as you mentioned: claim the survivor benefit first and leave her own retirement benefit unclaimed as long as to age 70. That would give her the largest monthly benefit for her lifetime. If she has a $1,500 Full Retirement Age (FRA) benefit, I estimate her age 70 benefit to be about $1,920.

If she were to wait until age 70 without the survivor benefit, she would receive nothing while waiting. But, in this case, she can be “getting paid to wait,” as you say. Survivor benefits can be claimed as early as age 60, but in her case, they became available in 2021 when her ex-spouse died. As she was born in August 1957, her FRA for survivor benefits is 66 and 2 months. At that time, she will be eligible to claim her deceased ex-spouse’s full retirement benefit – or technically whatever he was entitled to receive upon the day of his death or his FRA benefit, whichever is larger.

I don’t know if he died before reaching his FRA – we didn’t get that detail. We’ll trust that someone has checked that she could receive $1,300 at her FRA for survivor benefits at 66 and 2 months. She would receive that amount throughout the three years and 10-month period, then turn on her age 70 retirement benefits.

Now I’m sure some readers are saying, “No, you can’t do that anymore!” But you can do that with survivor benefits in coordination with your retirement benefit. You can claim one without affecting the other. It’s spousal benefits that you can’t do this with anymore because of deeming – unless you were born before January 2, 1954, which your sister wasn’t. But we’re not talking about spousal benefits here.

You’ve pointed out that although your sister could claim her deceased ex-spouse’s FRA benefit as her survivor benefit at her age of 66 and 2 months, she’s continuing to work. And that raises the earnings test issue. As someone who has researched Social Security, you know that Social Security benefits are reduced if you’re still working and earning money but that the earnings test magically disappears at your FRA. With your sister’s scenario, the issue applies.

Being born in 1957, her FRA for survivor benefits is 66 and 2 months, but her FRA for retirement is 66 and 6 months. Your question is, “Which of those two ages is the magic point when the earnings test no longer applies?”

You can find the answer in the POMS (Program Operations Manual System) for Social Security, which is the instruction booklet for how Social Security is applied. The section on the earnings test, RS02501.021, section B3, states: “Always use the FRA for retirement insurance benefits when applying the annual earnings test for retirement insurance benefits or widow/widower insurance benefits. Although FRA for widow/widower insurance benefits may be earlier, the FRA for retirement insurance benefits is controlling for annual earnings test purposes. This rule applies even if the beneficiary is not entitled to retirement insurance benefits.” So, it’s spelled out in black-and-white: her 66 and 6 months FRA for retirement benefits controls this.

So, does that mean she should wait until 66 and 6 months to claim a benefit? I don’t know because I don’t have enough details. You stated that she earns less than $50,000 per year, so the reduction caused by the earnings test may not offset all the Social Security benefit she will start receiving earlier. If so, she may as well claim it. She could claim at 66 and 2 months, start receiving her survivor benefit then and endure the reduction caused by the earnings test for four months until she reaches her retirement FRA at 66 and 6 months. The earnings test reduction will end. However, if she claims before 66 and 2 months, she will receive less than $1,300 because she’s then deemed early filing for those survivor benefits.

I’d have to see more specific numbers on earnings – instead of nice round numbers like $1,300 and $1,500 – to make a firmer suggestion. There might be a few dollars more, one way or the other. But here’s the critical issue: by claiming her survivor benefit early, there’s no effect on her ultimate retirement benefit from age 70 forward. However, these rules are unique to survivor benefits. They don’t apply to spousal benefits – when one’s spouse or ex-spouse is still alive. So, be sure you’re very clear about keeping those two situations separate. We’re talking specifically about what Social Security calls “widow or widower” benefits.

I like what you’re thinking for your sister – and I repeat that she didn’t get the full story from her advisor on this particular topic.

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