Understanding survivor benefits

The Savings Game

As readers of my column know, Social Security regulations are complex, and unfortunately some Social Security Administration representatives and many financial planners are not aware of some important benefits. I have received many inquiries regarding survivor benefits from people who do not understand options that are available.

One benefit scenario many are unaware of is when a worker dies relatively young. Even if a deceased worker has not yet acquired 40 credits, his or her survivors may still be eligible for significant benefits. In 2017, a worker receives one Social Security credit for each $1,300 of earnings, up to a maximum of four credits per year.

In other words, an individual who earns $5,200 or more in 2017 receives the maximum four credits.

A worker does not need to live until full retirement age for his or her survivors to be eligible for a benefit. For example, if a worker died at 28 or younger, only six credits are needed for the widow(er) to receive maximum survivor benefits.

The date of birth of the widow(er) determines when he or she is eligible for full benefits. For example, a widow born by 1939 would be eligible for full benefits. A widow(er) born after 1962 would be eligible for full benefits at 67. (The full retirement age, or FRA, for widow(er)s is slightly different than the FRA for workers and their spouses.)

Normally, you must be at least age 60 to be eligible for widow(er) or surviving divorced spouse benefits. However, if you are taking care of the decedent's child, you may qualify for benefits at any age. The child must be under age 16, or disabled, and must be drawing Social Security payments on the worker's record.

A surviving divorced spouse must be unmarried to be paid as the child's parent. If you meet these conditions, you are entitled to receive 75 percent of the worker's full benefit amount. The child, under the age of 16, is entitled to 75 percent of the worker's full benefit amount.

It is crucial to understand the remarriage rules for widow(er)s. Widow(er)s lose survivor payments if they remarry before age 60. For marriage after 60, benefits continue.

If you wait until your FRA as a widow(er), you will receive 100 percent of the payment the worker was entitled to, with a minimum of 82.5 percent of the full payment amount. There is no advantage in waiting after your FRA for benefits because the payment will not increase except for COLA adjustments.

If the deceased worker was receiving a reduced payment because of early retirement, your payment will be reduced to that level, or 82.5 percent of the full payment amount, whichever is greater.

If the worker was receiving additional income for Delayed Retirement Credits (because he applied for benefits after his FRA), your payments will reflect that additional income. If the worker died before ever receiving Social Security payments, you will receive 100 percent of the full payment amount. If the worker died after his or her FRA before filing for benefits, you are entitled to the additional Delayed Retirement Credits.

If you are the parent of a deceased worker and were dependent on that worker, you may be entitled to benefits. You must be the natural parent or have become the worker's stepparent or adopting parent before the worker reached age 16.

You must have received one-half of your support before he or she died. You must also be at least 62. The payment amount is based on the worker's "primary insurance amount" (PIA), the same as other survivors.

For one parent, the benefit is 82.5 percent of the worker's PIA. For two parents, the payment would be 75 percent of the PIA.

Social Security does have family limits. Accordingly, payments to parents and other family members may be reduced because of these limits.

Survivor benefits are complicated. Andy Landis' "Social Security: The Inside Story" (www.andylandis.biz) contains detailed information, with examples, regarding survivor benefits. Do your homework before sitting down with a Social Security representative.

Elliot Raphaelson welcomes your questions and comments at raphelliot@gmail.com.

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