Let’s look at an example, ignoring COLAs for the moment. Assume that Lisa is age 60 and was married to Jim prior to his death. Lisa is entitled to receive a full survivor benefit of $2,400 per month at age 66 (her Full Retirement Age), or a reduced survivor benefit of $1,716 per month at age 60. Lisa has also earned her own worker benefit of $1,500 per month at age 62, or $2,000 per month at age 66.
Using the first strategy, Lisa could choose to take the $1,716 reduced survivor benefit at age 60. See Figure 1. On the surface, it might appear that this is the best option because not only is $1,716 higher than the $1,500 worker benefit Lisa is entitled to at age 62, but she can also start it two years earlier. However, Lisa should consider her other options before making a decision.
With the second strategy, Lisa could draw her $1,500 worker benefit at age 62, and then switch over to the full survivor benefit of $2,400 at age 66. If Lisa has the resources from other retirement accounts to provide herself with income between ages 60 and 62, this method may work very well, since she will ultimately be drawing the higher $2,400 benefit for the rest of her life. See Figure 2.
The third strategy is for Lisa to start her survivor benefit at age 60, and then switch over to her worker benefit at age 70, thereby delaying the worker benefit beyond her Full Retirement Age and maximizing the Delayed Retirement Credits applied to that benefit. She would start the survivor benefit of $1,716 per month at age 60 and then switch to her worker benefit of $2,640 (the $2,000 benefit at Full Retirement Age increased by an annual 8% Delayed Retirement Credit for four years) at age 70. See Figure 3.
This strategy is the same as the first, except that Lisa switches over to a higher benefit at age 70. Why wouldn’t she choose this strategy, as opposed to the first one? The answer is likely that she wouldn’t choose this strategy only because she is unaware that this option is available to her.
This example is not to imply that the third strategy is always best. Any “optimal strategy” depends on the sizes of the widow’s or widower’s own worker benefit and the survivor benefit, as well as the individual’s own health and financial situation.
Another point worth noting is that, depending upon how much an individual earns, a worker or survivor benefit may be subject to a reduction. This determination is made based on a calculation known as the Earnings Test, and is discussed below. Finally, although age 66 is cited as the Full Retirement Age in these examples, the Full Retirement Age is slowing increasing over time and will be age 67 for those born in 1960 and later.
For a widow or widower, the decision regarding when and how to claim Social Security benefits is likely more complicated than it first appears. Those who are entitled to both their own worker benefit and a survivor benefit should consider the available claiming strategies to maximize the potential lifetime retirement income that Social Security provides.