Many women face financial hardship after the death of a husband, but there are social security claim strategies for widows that can help them feel less financially vulnerable.
After the loss of your partner, it can be overwhelming to deal with the grief alone. Add in financial questions and concerns, and it can become excruciating. This was the case for Cindy, 48 years old. Ever since Cindy’s husband died of a sudden heart attack in January 2021, she has been managing without the love of her life as well as without his income, leaving her with financial anxieties.
Jon, her husband, was the sole breadwinner and his income easily supported the entire family, including their two daughters, ages 14 and 17. Cindy and Jon did have life insurance, but even with the life insurance proceeds, Cindy was capable of having to re-enter the job market with less than ideal prospects, having not practiced law in over 15 years. She found herself wishing she had been more involved with the finances and they were more prepared financially.
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Cindy isn’t alone. Household income for widows typically falls by 37% after a husband dies, and widows’ assets also tend to fall significantly more than those of husbands who lose their husbands.
It’s not just younger widows looking at Social Security options
Older widows also see significant loss of income after the death of their partner. Janet, 72, was married to Ted for over 40 years and when Ted passed away five years ago after a long battle with cancer, Janet’s income immediately dropped. The Social Security income coming into Janet’s household was cut by a third, and Ted’s retirement benefits from his previous employer also stopped.
Unfortunately, Janet and Ted had not opted for a joint and survivor’s pension payment, which would have given the surviving spouse a benefit for life.
Janet was forced to sell their childhood home and downsize to a small apartment in their neighborhood. Losing the love of her life was already traumatic, and selling the house with so many memories of Ted and her growing children almost pushed her over the edge.
Investigators discovered that Janet’s situation is more common than one might think. Merrill Lynch and Age Wave research (opens in new tab) found that 53% of widows surveyed said they and their partner had no plan for what would happen if one of them died. Janet and Ted had never discussed the various retirement payment options and how she would survive without his income.
‘Getting the most out of social security is crucial’
According to Natalie Colley, CFP®, CDFA® and chief financial advisor at Francis Financial (opens in new tab) who specializes in working with widows: “For women who have experienced the death of a husband, getting the most out of Social Security is critical. Now that you no longer receive income from your spouse, Social Security benefits will most likely make up a much larger portion of your retirement income. However, most women don’t fully understand the confusing Social Security payout options, allowing them to fully maximize this benefit.
Let’s take a closer look at Cindy’s Social Security situation
Cindy immediately began interviewing asset managers and knew it was important for the advisor to put the client’s best interest above his own and be transparent about his fees. She eventually hired Colley because of her expertise in working with widows like her, in addition to the fact that Colley was a fiduciary and only paying consultant. Colley explained that Cindy and her family would be eligible for Social Security income.
As many as 6 million Americans rely on Social Security survivor benefits (opens in new tab) to replace lost income of a deceased parent or spouse. Young widows like Cindy may be eligible for two Social Security benefits:
Survivor benefits for children. According to the Social Security Administration, if the deceased had children under the age of 18, their children will most likely be entitled to Social Security child support (opens in new tab) . These benefits can be extended to age 19 and 2 months if the child is in full-time school in 12th grade or below. The payments can also be extended until age 22 if the child has a disability that occurred before age 22.
Typically eligible children are biological and adopted children of the deceased. In certain cases, a stepchild, grandchild or stepgrandchild is also eligible.
A child can receive up to 75% of the pension benefit from its deceased parent. However, there is a limit that Social Security has set that limits the total amount a family can receive on the deceased parent’s record. It can range from 150% to 188% of the deceased’s full retirement age. This limit usually comes into play when there are a lot of kids collecting payments. The child benefit is reduced pro rata per child in order to comply with the maximum amount of the child benefit.
Survivor benefit mother or father. A spouse caring for the children of a deceased employee is entitled to survivor benefits until the youngest of those children turns 16. benefit (opens in new tab) . But when your youngest child turns 16, your allowance will stop.
Cindy’s Social Security strategy
Cindy collected the income paid to each of her daughters and used it to pay for daily expenses and increase their savings for college by opening a 529 school savings plan in her New York state. The average child support in New York is $947 a month, and these funds helped Cindy bridge the income gap created by her husband’s death.
Cindy also understood that saving for her own retirement was more important than ever. Cindy received benefits of $1,042 a month until her youngest reached her 16th birthday. Cindy used this money for living expenses so she could contribute to her employer’s 401(k) plan and receive the full compensation they offered, which was 100% of every dollar Cindy contributed up to $6,000 per year.
Let’s take a closer look at Janet’s Social Security situation
Janet also contacted Colley, on the recommendation of a dear friend who had also suffered the loss of her husband. Janet had a lot of questions about her financial future, and a lot of them were about Social Security and whether her benefits would change now that Ted had passed away.
Colley explained that the requirement to receive the survivor’s benefit was that you must have been married to your spouse for nine months. A widow can claim as early as age 60 (50 if she is disabled), but her benefit is permanently reduced for each month she claims before her full retirement age (FRA). Her benefit is based on how much her husband received in Social Security income. Widows are eligible for 100% of the deceased’s Social Security benefits when they reach full retirement age.
What is my full retirement age?
It can be confusing to know your full retirement age as it is different for most people and is based on the year you were born:
1943-1954: FR is 66 years old.1955-1959: FRA increases by two months each year from 1955 to 1959.1960 or later: FR is 67.
Janet’s Social Security Strategy
Janet applied for Social Security when she was 62, based on Ted’s earnings. Janet worked for several years during her career, but 100% of her own Social Security income ($1,216 per month) was less than the 50% of her husband’s benefit ($1,541 per month) to which she was entitled.
Nearly five years later, when Janet was 67, Ted died and she filed for survivor benefits. Janet is eligible for 100% of Ted’s retirement benefit ($3,082 per month) because she has reached full retirement age. However, Janet was no longer able to collect spousal support when she switched to survivor benefit.
“The Social Security Administration is an important safety net for Americans,” Colley said. “However, their intention is not to make people rich. Janet is therefore not allowed to collect both the partner’s and the survivor’s benefit. Janet must choose the more lucrative of the two.
For others, it may make financial sense to collect the reduced Social Security survivor’s benefit as early as possible at age 60 and transition to their own retirement benefit at any time from age 62, when you first move into eligible, until age 70, when the benefit amount stops increasing. For each year that a beneficiary defers its application between full retirement age and age 70, the benefit increases by 8%.
Colley advises: “For those widows who have worked and are eligible for their own retirement benefits, it is important to explore whether they can claim survivor benefits and increase their own Social Security benefits to the maximum amount at age 70. 70, it may make sense to switch from the survivor’s benefit to her own benefit. We have complex software that allows us to model the most beneficial social security strategy so that our clients know exactly what benefits to take and when.”
Social Security claim strategies aren’t easy, and Colley strongly recommends that widows hire a financial advisor with this expertise. “A widow’s income may be only two-thirds of what it was before their husband died. The stakes are high.”
This article is written by and represents the views of our contributing advisor, not the Kiplinger editors. You can check advisor records with the SEC (opens in new tab) or with FINRA (opens in new tab) .
