How couples can get the most from Social Security’s survivor benefit

How about this idea for a new reality TV show: “Survivor: Maximize your Social Security.” Rather than getting voted off the island, contestants lose when they fail to get the most out of Social Security’s survivor benefit – one of the government program’s most important features for married couples.

Here is how our reality show works. When one spouse dies, the survivor (typically, but not always the woman) has the option to take the larger of two benefits: her own or 100 percent of her late spouse’s benefit. The game sounds simple, and for many couples, it is.

But in many cases, a widow should not just take the larger of the two benefits. This is where our reality show gets interesting. A research paper published in the current issue of “The Journal of Retirement” illustrates why it sometimes makes sense for a widow to take her own benefit for a while, switching to the survivor benefit later. Or it may make sense to start with a survivor benefit and switch later to her own benefit.

The analysis comes from William Reichenstein, a professor of investment management at Baylor University, and William Meyer, a long-time veteran of the financial services industry. They are
the founders of Social Security Solutions, which develops software to help guide Social Security claimants in maximizing their benefits

The survivor benefit is one of the best illustrations of how Social Security really is “social insurance.” Payroll taxes paid into the program buy income protection for your spouse in case of your death – somewhat like life insurance. And survivor benefits are not limited to spouses. In some cases, surviving children who are unmarried can also can receive a benefit, as can dependent parents. One-time, lump sum payments can be made to spouses and children.

Survivor strategies can be especially important for women in the later years of life. One Social Security check stops coming when one spouse dies. For heterosexual couples, that typically
is the man. At an advanced age, savings often are depleted and the option of generating income from work typically is foreclosed.

The survivor rules underscore the ongoing need for thoughtful planning by couples. Learn more at Reuters Money.

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