Dear Rusty: I am a 58-year-old widow, born in 1958. My husband, born in 1953, was collecting Social Security Disability benefits when he died, worked throughout his lifetime and had earned enough credits to be eligible for regular Social Security benefits had he lived long enough. I know I can start collecting survivor’s benefits at age 60, but I’m not sure if that’s smart because I’d like to keep working and I’m not sure if working would affect my widow’s benefits. I should also mention that I don’t have the full 35 years working that Social Security uses to calculate my own retirement benefit amount, so I’m unclear about when or whether to consider switching from survivor’s benefits to benefits based on my own work record. Please help me figure out the best way forward. Signed: A Survivor
Dear Survivor: You already know that you’re not eligible for survivor’s benefits until you are 60 years old, and your plan to continue working after that does, indeed, add a wrinkle. While you will be eligible to begin survivor’s benefits at age 60, the benefit you receive will be reduced to 71.5% of what you would receive if you wait until your widow’s full retirement age (FRA). Note too that as a widow, your full retirement age is 4 months earlier than the normal FRA for someone born in 1958 – 66 years and 4 months vs. 66 years and 8 months for the normal.
In the immediate future I suggest you focus on eliminating some of those zero-salary years in your 35 year work record because they will reduce the Social Security benefit you will be entitled to. You said you want to continue working, and for each year you work now one of those zero years will be eliminated and your benefit amount from your own work record will increase. If working provides enough money to keep you financially comfortable, then delaying the start of your survivor’s benefit beyond age 60 will improve the reduction factor by about 4.5% for each year you delay, up to your FRA. The actual amount of your survivor’s benefit will be based upon your deceased husband’s primary insurance amount (the amount of benefit he would have been entitled to at his full retirement age) and the age at which you apply for survivor’s benefits. Even if you are still working, there’s no advantage to waiting beyond your FRA to start survivor’s benefits because the maximum survivor’s benefit is reached at FRA. Whenever you apply for your survivor’s benefit you will need to apply in person at your Social Security office, and you should be specific that you are applying only for survivor’s benefits, not your benefits based on your own work record.
If you choose to start collecting survivor’s benefits early and continue to work, Social Security’s “earnings test” could affect your benefit. Except for the year in which you attain your FRA, Social Security will take back $1 for every $2 you earn above their annual earnings limit, which for 2017 is $16,920.
Unlike survivor’s benefits which stop growing at FRA, the benefit available from your own work record will continue to increase if you wait beyond your full retirement age to start collecting it. In fact, your benefits from your own work record will increase by about 8% for each year you delay beyond your FRA, until you reach the maximum at age 70. A prudent approach might be to continue collecting your survivor’s benefits until some years past your FRA (but not later than 70) and allowing your benefit from your own work record to grow. Provided your own benefit is larger than your survivor’s benefit, you can then switch over to the higher benefit. In any case, do not wait past your FRA to start your survivor’s benefit, nor after age 70 to start your own retirement benefits.