One of the least understood benefits of the Social Security system is the survivor benefit. To understand just how costly this can be, let’s look at an example.
Consider two women, Lauren and Beth. They have much in common: Both are age 60 and both are eligible to receive the exact same amount in Social Security benefits based on their work records at age 66 (their Full Retirement Age): $2,000.
They have one more thing in common: Both were married and divorced from the same man. Lauren was married to Rick for 12 years before they divorced. Then Beth came into Rick’s life and married him 15 years ago. That marriage also ended in divorce last year. Neither Lauren nor Beth remarried.
Rick would qualify for $1,800 in Social Security benefits at his Full Retirement Age, 66. Sadly, Rick passed away after a car accident earlier this year; he was 64 years old and had not started to collect his benefits yet.
Lauren never bothered to learn much about her Social Security claiming options. She did what most people do, she started her benefits at age 62. When she went to sign up she was asked if she had been married before. She provided the facts to establish her marriage and divorce from Rick.
She was told—to her surprise—that she was eligible for the higher of her own work-based benefit or a survivor benefit based on Rick’s work record. It turned out that her work-based benefit was slightly higher, so she took that one and started collecting $1,500 per month.
Beth invested time into getting educated about her benefit options. When she heard that Rick had passed away, she knew she was eligible for a survivor benefit based on his work record. Moreover, she understood how best to get the most out of both her survivor rights and her own work-based benefit. This knowledge paid off handsomely for her.
Remember, they were each eligible for exactly the same options to start with when Rick passed away. Do their different claiming strategies make a big difference if they live to their average life expectancy of about 86?
As it turns out, it isn’t even close…
Beth will collect over $229,000 more than Lauren by age 86. She’ll receive $2,640 a month compared to Lauren’s $1,500 a month. That extra $1,140 each month adds up to $13,680 in extra benefits each and every year for Beth.
While it isn’t always simple to determine your best Social Security claiming strategy, it can make a huge difference in your financial security as you grow older. As you’ve seen from Beth and Lauren’s situation, it’s worth investing time and energy into getting educated about the complicated yet valuable Social Security program.
Many of these benefits are not automatic and no one is likely to reach out to you from the Social Security Administration to make sure you are aware. All too often you are on your own.
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