A Unique Widow Social Security Claiming Strategy
Are you a widow or do you know someone who is a recent widow? If so, this strategy may be worth considering between the ages of 60 and 70.
Under Social Security, widows are entitled to a widow benefit as early as age 60, two years earlier than the earliest filing option of 62 for most retirees. The unique strategy that can be used here is filing for only widow benefits while allowing your own Social Security benefit to continue growing until the maximum age of 70. While the Bipartisan Budget Act of 2015 did away with the restricted application loophole where you could “file and suspend”, they kept the provision that allowed a widow to claim benefits on a deceased spouse while leaving their own benefit untouched.
This strategy is particularly useful if their own benefit will grow to be larger than the survivor benefit they are entitled to. Because these individuals might be enticed to take their larger benefit earlier, I have seen situations where they file for their own benefits instead of widow benefits as early as 62 to get the extra income. As you’ll see in the example below, that can be a costly mistake.
Example – Jane is 63 and was married to Bob before he passed away this year. Her Social Security benefit is estimated to be $2,200 per month if she takes it now at 63, $2,700 at 67, and $3,400 at 70. Her survivor benefit on her deceased husband’s earning record entitles her to $1,800 now. The Social Security rules state that you cannot have both at the same time. You can claim the survivor benefit and leave your own benefit untouched, but once you claim your own benefit, the survivor benefit will go away if it is smaller. Because of that, Jane may be tempted to file for her own benefits as it would provide her with $400/month more than the survivor benefit ($2,200 vs. $1,800). However, a more optimal strategy may be for her to take the smaller survivor benefit and allow her own benefit to continue to grow.
If she takes her own benefit at age 63, she is paid more initially and accumulates more benefits early on than if she had taken the survivor benefit. However, by year 9 when she is 72, the strategy of taking only the widow benefit and delaying her own until age 70 provides a greater lifetime benefit. The difference between the two grows larger and larger and by the 23rd year (age 85), the strategy of delaying has paid out $320,000 more in benefits!
This strategy assumes she can afford to take less income now, which not all people are fortunate enough to be able to do. However, if you or someone you know can have some flexibility in when their higher income starts, this strategy is certainly worth considering!
Happy planning,
Alex
This blog post is not advice. Please read disclaimers.