Americans commonly think of Social Security benefits as monthly checks that people receive when they retire.
While this understanding is certainly correct, it is important to realize that there are other ways that the federal program also provides financial assistance.
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Funded by payroll taxes, it is administered by the Social Security Administration and is also called the Old-Age, Survivors, and Disability Insurance (OSDAI) program.
Social Security also provides benefits for disabled people, as long as they meet some necessary requirements based on their work history and medical conditions.
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But there is another form of income the program pays to those facing a different hardship: the death of an eligible beneficiary.
Dependents of Social Security participants who die, including children and other family members, may also receive extended benefits.
Social Security survivor benefits for couples
Social Security benefits for couples can be extended to survivors if one of them dies.
And these benefits operate independently of retirement benefits, meaning people can delay one while collecting the other.
This creates a complicated decision that the survivor faces.
At age 60, with a formula involving the deceased spouse's earnings history, the surviving spouse can begin receiving a survivor benefit.
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Another option involves the survivor waiting until age 62, when they can begin collecting their own retirement benefit.
Doing this either way allows you to receive the other benefit later. And any decision made regarding this choice can make a big difference in the total benefits received for life.
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An expert offers an example to explain Social Security survivor benefits
Author Jim Blankenship, writing for TheStreet's Retirement Daily, described a scenario to help clarify the type of decision-making a survivor might face.
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The example is that of a 59-year-old woman whose husband, a few years older than her, recently died. The man had planned to apply for Social Security benefits at age 70, but he only lived to be 65.
In this hypothetical case, the woman had left the workforce or had reduced her income to the point that she was no longer limited by the Social Security Retirement Income Test (RET), which can reduce benefits for people who claim them. before full retirement age.
When she turned 60, the woman would be eligible to receive the survivor benefit, or she could wait until she turned 62 to collect her own benefits.
Blankenship, in this example, refers to the woman as Michelle and the man as Thomas.
“If Thomas had lived to his full retirement age (FRA) of 67, he would have been entitled to a benefit of $2,500 per month,” he wrote. “Michelle also worked and got a benefit that will be $2,800 per month if she waits until her FRA (also 67) to apply for benefits.”
If the woman chose to begin receiving the survivor benefit at age 60, she would receive the minimum of $1,787. But waiting until age 67 would allow him to receive the full $2,500 a month.
“If Michelle waits until age 67, her retirement benefit would not be reduced to $2,800 a month,” Blankenship wrote. “If she waits until age 70 to apply, Michelle would be eligible for a maximized benefit in the amount of $3,472 per month.”
“When comparing these two situations, at first you might think that the second is the better option, since it costs $173 more per month,” Blakenship added. “But Michelle would have to wait two more years before taking that option, giving up $42,888 over that period, $21,444 per year.”
In this scenario, it would clearly be better for the woman to receive the survivor benefit first and then her own.
Individual circumstances, of course, are different and could justify either decision depending on the details.
“But it is valuable to know that there are options to choose from when approaching this decision,” Blankenship wrote.
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