10 Bizarre Things About Social Security - Part 5: Even In Poor Health, You May Want To Delay Social Security
There is a common belief that if you are sick, you should claim your Social Security benefits as early as possible. That way, you can receive the most Social Security income as possible before you die. That makes sense in most cases -- but not always if you're a married couple. Let's talk about why you might want to delay claiming Social Security, even if you're sick.
Married couples: if the spouse with the bigger benefit is sick, they still should consider delaying their benefits. Even if they die before ever receiving one benefit check.
The reason? The bigger benefit is eventually going to be the Survivor Benefit. After the first spouse dies, the surviving spouse is only going to receive one benefit check. Fortunately, they will continue to receive the bigger benefit.
If the first spouse claims it early because of their illness, they will be leaving their surviving spouse with the smallest Survivor Benefit possible.
But if they delay, they could leave their surviving spouse in a much better financial position. That would be the case even if they died before ever claiming their benefits.
Here’s an example that shows exactly how it works.
How Delaying Your Social Security Even When Sick Can benefit Your and/or Your Spouse
Let's look at spouses Pat and Cory. They both claim at age 62. Let's compare this scenarios. One where the husband dies before he had a chance to claim his benefit, to another in which both spouses claim their benefits at age 62.
Both Claim at Age 62
Table 1 above illustrates Pat and Cory claiming their benefits at age 62. Their Full Retirement Age Benefits are $1,000 per month for Pat and $1,500 for Cory. But because they both claimed their benefits at age 62, the amount is reduced to $750 and $1,125.
They receive these same benefits up until the day Cory dies at age 68. After he dies, Pat can claim a Survivor Benefit based on her husband’s larger benefit and receive $1,237 per month. If she does this, her smaller benefit of $750 per month stops, as you see in the Age 68 column.
In this situation, Pat’s Survivor Benefit is increased from $1,125 per month to $1,237 per month. This is because Social Security pays the surviving spouse a minimum Survivor Benefit of 82.5% of the deceased spouse’s Full Retirement benefit. When Cory claimed his benefits at age 62, he received 75% of his Full Retirement Age Benefit or $1,125.
After he died, they increased the amount of the Survivor Benefit up to $1,237 per month. She will receive that Survivor Benefit of $1,237 per month starting at age 68 for the rest of her life.
Cory Dies At 68 Without Claiming, Pat Claims At 62
Table 2 shows what happens if Cory delayed claiming and died before his benefits began. Here, Pat claims her reduced benefit of $750 per month at age 62. Cory plans to wait until he is age 70 (as shown by the zeros in the table).
At age 68, Cory dies before he has a chance to claim his Social Security benefit. Even though he never received any Social Security income while he was alive, Pat will benefit greatly as a result of his delaying the claiming of his benefits.
Look under the Age 68 column. You will see that after Cory’s death at 68, Pat switches her benefit. She goes from her own smaller benefit of $750 per month to her Survivor Benefit of $1,740 per month. The widow’s Survivor Benefit is $1,740 per month because that is the amount of the monthly Social Security check Cory would have received at the time of his death at age 68.
Why the Delayed Social Security Amount is Better
The husband’s check was $1,740 per month because, for every year he delayed after his Full Retirement Age of 66, he received Delayed Retirement Credits and his benefit grew by 8% per year.
In this case, he was 68 when he died, which was two years past his Full Retirement Age of 66. So his benefit would increase by 16% (2 x 8% = 16%). Increasing his Full Retirement Age Benefit of $1,500 by 16% brings it up to $1,740 per month.
Even though Cory never received any of his Social Security benefits, Pat is left in much better financial condition because her monthly Social Security Survivor benefit check is $1,740.
If Cory had claimed his benefits at age 62, like he did in the first table, when he died, Pat’s monthly Survivor Benefit check would have only totaled $1,237.
The Survivor Benefit
We know that there is a high probability that the surviving wife could live for another 20 to 25 years and the much higher Survivor Benefit check of $1,740 per month will also receive bigger dollar increases every year because of the COLA feature (more on this later).
It is unfortunate that Cory died before he claimed his Social Security benefits, but the bigger Survivor Benefit he left his wife should make her life much easier. It is one of the greatest gifts he could ever give her.
This is Part 5 of a 10 part series. Keep your eyes open for more Social Security tips and advice coming soon.
1: Your Ex-Spouses Could Receive Your Full Social Security Benefit If You Die Before Them
2: Social Security’s Viagra Benefit
3: How to Get a Large Lump Sum Check from Social Security
4: Divorces Could Greatly Increase Your Social Security Income
