Losing a spouse is devastating, both emotionally and financially. For many widows and widowers, the passing of a partner significantly impacts their household’s Social Security benefits. A simple rule about survivor benefits could make the difference between receiving six figures more or missing out on vital financial support.
The Financial Toll of Widowhood
When Diane, a 75-year-old widow, lost her husband, she assumed that her monthly Social Security benefit of just over $1,000 was what she was supposed to receive.
This is a common misconception among widows. However, after attending a Social Security workshop, Diane learned she was actually entitled to a much higher survivor benefit—$2,400 per month based on her late husband’s earnings.
Had Diane applied for the correct survivor benefit, she would have received an additional $16,800 per year, totaling $213,000 over her expected lifetime. In addition, she had missed out on over $84,000 between the ages of 70 and 75.
This situation highlights a major issue: millions of American seniors are missing out on Social Security benefits simply because they don’t know the best time to claim them.
A study from United Income estimates that Americans are losing out on over $3.4 trillion by failing to claim their Social Security benefits at the optimal time. Shockingly, only 4% of beneficiaries file at the best time, with widows especially vulnerable to missing out.
Steps to Prepare for Widowhood
To avoid losing out on crucial benefits, there are three key steps that couples can take to prepare financially for widowhood:
1. Plan Ahead for Survivor Benefits
The first step is to plan ahead for Social Security survivor benefits. When a spouse passes away, the surviving partner’s income often takes a hit—sometimes by as much as 30% to 50%.
Unfortunately, while their income decreases, their tax bracket may not, leading to a higher tax burden. A widow may face higher taxes because they now file as a single taxpayer, and their standard tax deduction is halved.
Couples should consider which spouse has the higher Social Security benefit and whether it makes sense to delay claiming benefits to maximize the survivor benefit. It is essential to understand how survivor benefits work and plan accordingly.
2. Avoid Common Mistakes
Many widows and widowers make costly mistakes when claiming Social Security benefits. Some of the most common errors stem from the complex claiming process, which includes over 500 possible filing combinations for couples. Social Security representatives often cannot provide personalized guidance, and many financial advisers focus on areas outside of Social Security planning.
For widows and widowers, one common mistake is claiming benefits too early. Survivors can begin claiming benefits as early as age 60 (or 50 if disabled), but doing so will result in a reduced benefit unless they wait until full retirement age (FRA). If they wait until FRA, they can receive 100% of their deceased spouse’s benefit.
3. Run the Numbers
To optimize Social Security survivor benefits, it’s important to run the numbers and model different scenarios. Widows and widowers should understand all their retirement income sources, how they are taxed, and when they can start receiving them. Their household status—whether married, divorced, widowed, or single—can significantly impact their strategy.
By running these figures, retirees can find the best strategy for claiming Social Security. The difference between one approach and another could amount to hundreds of thousands of dollars over a lifetime.
