Maximizing Social Security Survivors Benefits

Editor’s note: This video was recorded before the Social Security Fairness Act was signed into law, repealing the WEP and GPO.

Robert Powell: The restricted application rule was largely phased out for retirees born on or after January 2nd, 1954. However, Social Security’s restricted application strategy is still available for widows and widowers. Here to talk with me about that is Dana Anspach from Sensible Money. Dana, welcome.

Dana Anspach: Hi Bob, glad to be here.

Powell: I’m eager to learn more about how the restricted application works for widows and widowers.

Anspach: Absolutely. I’m excited to talk about this topic. Let me share a real-life story of a client I’ll call Carla. Carla was married to Larry, who was about 15 years older than her and passed away suddenly when she was in her late 50s. We advised Carla that if she ever wanted to remarry, it would be important not to do so before age 60 to preserve her right to collect a survivor benefit on Larry’s record.

A few years later, Carla met someone new. We discussed the financial impact and showed her why it was crucial not to remarry before age 60. She planned her wedding for just after her 60th birthday and is still happily remarried today.

At 60, Carla was still working. If she had claimed her survivor benefit then, she would have experienced a reduction due to the earnings limit. We explained that she needed to wait until her full retirement age, which for her was 66. For people born in 1956 or later, that full retirement age is 67.

When Carla turned 66, she was able to file and collect a widower’s benefit on Larry’s record using the restricted application. This allowed her to claim the widower’s benefit for a few years while her own retirement benefit continued to grow. At age 70, she can then file a new application for her retirement benefit and switch to that higher amount.

In Carla’s case, this strategy allowed her to receive about $29,000 a year from age 66 to 70, and then switch to about $44,000 a year on her own retirement benefit at 70 – a significant difference.

Powell: When she filed for the restricted application on her deceased husband’s record, was that benefit based on his full retirement age benefit or something else?

Anspach: Because Larry hadn’t filed when he passed away, it was based on his full retirement age benefit amount. To get the full amount, Carla had to wait until her full retirement age to claim. If she had claimed earlier, it would have been reduced according to a formula.

There are different rules if the deceased spouse had already started claiming benefits. Generally, the survivor gets at least as much as the deceased was receiving, with some exceptions and special provisions.

Let me share another story about a client we’ll call Diane. She had been married to Paul, who passed away. Diane had heard she could claim widower benefits at 60. When she went to the Social Security office, they told her she could get more if she waited until 62, which was technically true. She waited and filed at 62.

While the information Diane received was technically correct, it didn’t result in the best outcome for her. What she didn’t know was that she could have claimed the widower benefit at 60, continued to preserve her own retirement benefit, and switched to that at 70 for a much higher amount. In her case, this mistake cost her almost $1,900 more per month, or about $200,000 over her lifetime.

It’s important to note that Social Security office workers are overwhelmed and may not know all the rules or be able to give advice. That’s why it’s crucial to do your own research or work with a knowledgeable advisor.

Powell: Is the Social Security Operations Manual something that our average listener should consider consulting?

Anspach: The Operations Manual can be hard to understand, but it can be helpful in certain situations. We’ve had cases where we’ve sent people to use the restricted application, and they’ve been told they can’t do it. We’ve had to provide specific sections of the manual to show eligibility for the Widow/Widower Insurance Benefit (WIB) and how to restrict it to exclude the Retirement Insurance Benefit (RIB).

There are also provisions for those with multiple previous marriages. In complicated scenarios, we highly recommend seeking professional help.

Powell: What do surviving spouses need to know about the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO)?

Anspach: The WEP and GPO are provisions that apply if you worked for an organization and had earnings not covered by Social Security, typically state or local government jobs. The WEP can reduce your own Social Security benefit, while the GPO can reduce your survivor benefit. These reductions won’t show up on your Social Security statement, so it’s important to factor them in when deciding on claiming strategies.

Powell: What are some key takeaways people should remember?

Anspach: The main takeaway is that when you lose a spouse, it’s traumatic, and you may not be thinking clearly about Social Security claiming strategies. If you know someone who has lost a spouse, encourage them to pause and do some extra research or work with an advisory team that knows these rules well.

Also, remember that these rules can apply if you were married for at least 10 years, even to an ex-spouse who has passed away.

Powell: Any advice for widows and widowers in retirement communities who might have misconceptions about remarrying after 60?

Anspach: After 60, you can remarry without it impacting your survivor benefit. In fact, some people strategically marry later in life to gain access to higher survivor benefits. Don’t automatically rule out getting married later in life, but definitely do your homework before making any decisions.

Powell: Dana, thank you for sharing your knowledge and wisdom with us. Happy Halloween!

Anspach: Thanks, Bob. It’s always great to talk with you.

For more, read Maximize Social Security Survivor Benefits: Simple Tips.