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  • Writer's pictureChris Stein, CFP®

Survivor Benefits and Continuing to Work

As a follow up on our previous posts regarding the Basics of Survivor Benefits, this week we are going to answer a question regarding how Survivor Benefits are affected when the widow(er) continues to work while receiving these benefits.

The Scenario:

Ten years ago a listener’s wife passed away at age 56.  They had been married for 10 years and the widower has never remarried.  Our listener is turning 60 next month and is considering collecting the Survivor Benefits that he is entitled to and moving into a less stressful and lower paying job.  He would like to know how he will be affected by this decision.

The Long of It:

First, it is important to know that Survivor Benefits and Retired Worker Benefits are separate and do not affect each other directly.  That is, if Survivor Benefits are claimed at age 60 then your Retired Worker Benefit will continue to be based on the earnings credits and Primary Insurance Amount (PIA) that you have accumulated, and the benefit amount will continue to grow with delayed retirement credits.

Second, because our listener is considering collecting at age 60, he will be subject to a 28½% reduction of Survivor Benefits.  The benefit amount will be based on a PIA (earned by his belated wife) that he could receive at his Full Retirement Age. We assume that since his wife passed away at such a young age that the PIA is already lower than normal.  So, he will naturally get a lower benefit amount since his wife could not contribute to Social Security at her full potential and then he will reduce this benefit even further because of the early claim.

Third, the Earnings Test could negate or reduce any Survivor Benefits that may be received.  If you continue to work while collecting Survivor Benefits before your Full Retirement Age, your benefits will be offset by $1 for every $2 earned above the $15,470 exempt amount ($15,720 for 2015).  As an example; if in 2014 the Survivor Benefit was $18,000 yearly ($1,500 per month) and the survivor took a less stressful job that paid $40k per year, how much of the Survivor Benefit will they actually receive?  Well, their benefit will be offset by $12,265 and they will receive $5,735 yearly ($477.92 per month)

Fourth, unlike Retired Worker Benefits that are subject for an upward adjustment at your Full Retirement Age to make up for benefits lost due to the Earnings Test, Survivor Benefits are not afforded such treatment.  Survivor benefits will not be adjusted upward due to benefits lost from the earnings test.   However, keep in mind that both types of benefits are not subject to the Earnings Test after Full Retirement Age.

And finally, it is always important to consider your own personal happiness when making these decisions. Our listener explicitly mentioned that he is looking to move into a less stressful job.  After finding out what his actual benefit amount will be and whether or not he will lose or reduce the benefit due to the earnings test, he truly needs to consider if the reduced earnings will provide him a standard of living that will not cause more stress than his current stressful job.

For more information, please use the  play button below to listen to the audio post.

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