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  • Writer's pictureChris Stein, CFP®

The $69,000 Survivor Benefit That Almost Never Happened

This week we describe a situation where had a person followed the recommendation they received at the Social Security office they would have left unclaimed a $69,000 Survivor Benefit.  This story should reinforce what we warn of repeatedly.  The Social Security office is not allowed to provide comprehensive claiming advice or provide you with strategies.  They are tasked with describing for you what benefit looks the best on the day you are in the office speaking to them.

Here’s the Story…

Let me summarize the story.  Any personal details have been removed or changed to protect the identity of this person.  The story begins with a widow who is currently 62 years and 2 months old.  She asked us to confirm if the option she was given at the SS office was the best for her.  When she went to the SS office they provided her the following information:

  1. She qualified for a Survivor Benefit of $1960/month if she claimed that day. If she waited to her full retirement age (FRA) of 66 the benefit would be worth $2400/month.  The benefit for today, and at her FRA were both larger than her own retirement benefit at those two ages.

  2. The SS representative advised her that by waiting to her FRA she would receive the extra $440 per month ($2400-$1960)for the rest of her life.

  3. Based on this information she was planning to wait to 66 and claim the $2400/month, which she thought would maximize her long term benefits.

What The SS Office Didn’t Tell Her

What was not made clear to her by the SS representative:

  1. Although at her current age and her FRA the Survivor benefit was larger than her own Retirement benefit, due to earning delayed retirement credits her own benefit would grow to a larger amount than the $2400 if she waited to claim her benefit until age 70.

  2. She is allowed to start with her Survivor Benefit and then “switch” to her own benefit in the future.

Since her own benefit eventually grows to a larger amount than her Survivor benefit there is no reason for her to stay with her Survivor benefit indefinitely.  At her age 70 she should switch, and this is where SS almost led her astray.  Had she made a decision based on their info she would have waited to age 66 and claim her maximum Survivor benefit of $2400.

Here’s the Numbers

Let’s look at those numbers up to her age 70:

She would give up claiming                          $90,160 (46 months of $1,960 as she waits to age 66)

She would receive an extra                           $21,120 (48 months of $440 extra, but only to age 70)

For a difference of                                          $69,040 (She would have left this money on the table)

Claim Survivor Benefit and then Switch

Instead, if she were to claim her Survivor benefit now and continue it to her age 70 then SWITCH to her then maximum Retirement benefit (that is now more than $2400) she would capture that $69,040 and still end up with a monthly benefit at age 70 that is larger than $2400/month and would last until she passed away.  This was a huge mistake just waiting to happen.  It is not that the SS representative didn’t know the rules or that they gave her wrong information. They just did not look into the future and anticipate the “strategies” that could be employed to make sure she received all the benefits she was entitled to.

For more information on this topic, please use the play button below to listen to the audio blog.

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