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How Your Spouse Can Use Your Social Security When You're Gone

Sep 10, 2019 4 min read Karen Kroll

Key Takeaways

  • The Social Security earnings test affects survivor benefits.
  • The earnings test can reduce or even eliminate benefits.
  • Life insurance can help replace lost survivor benefits.

Social Security can be a financial lifeline when a wage-earning family member passes away. But it could have a negative effect if you fail an annual exam known as the “earnings test." The reason: If you haven't reached your full retirement age (FRA), the earnings test can reduce—or even eliminate—survivor benefits that can help you and your kids compensate for the loss of your loved one's wages.

That's why it's critical to understand how the Social Security Administration calculates survivor benefits, and how the earnings test can affect them.


Who qualifies for survivor benefits

If you're age 60 or older (or at least age 50 and disabled) when your wage-earning spouse passes away, you'll typically be eligible for a reduced level of the standard Social Security benefit.

This is also true if you care for a deceased spouse's children who are under age 16 or have a disability. Survivor benefits can also go to unmarried children of a deceased wage earner age 17 or younger (18 if a full-time student). In some cases, older children, stepchildren, grandchildren and others can qualify as well.

The earnings test comes into play if you're below your full retirement age for survivor benefits. To find your survivor's FRA, check this chart Opens in new window. It shows, for instance, that if you were born in 1962 or later, your FRA is 67. If you claim Social Security survivor benefits before you reach that age, your benefits can be reduced by $1 for every $2 your wages exceed the annual limit, ($17,040 for 2018   PDF Opens in new window).

The numbers change the year you reach FRA, when your benefits are reduced by $1 for every $3 you earn above a different limit, $45,360 for 2018. Once you reach the month of your FRA, you will receive your full benefits, no matter how much you might still be earning.

The earnings test applies to wages and self-employment income only; interest, dividends, withdrawals from retirement accounts and other unearned income don't count.

The thresholds used in the Earnings Test typically increase each year, following
corresponding increases in the national average wage index.

A real-world example

See the graphic below to see how the earnings test could play out in real life. For some background, Lisa is a 50-year-old widow with one 14-year-old daughter named Morgan.


Calculating Lisa's Survivor Benefits

  1. Lisa received $24,936 in gross survivor benefits per year after her husband passed away. Here's what she actually takes home, once she accounts for the earnings threshold.
  2. Lisa'a Income - $60,000
  3. 2018 Survivor Benefits Earnings Threshold - $17,040
  4. Lisa's Income Above the Earnings Threshold - $42,960
  5. Total cuts to survivor Benefits($42,960/2) - $21,480
  6. Lisa'a Survivor Benefits($24,936-$21,480) - $3,456/Year


When Morgan turns 16 in two years, Lisa loses her eligibility for survivor benefits. She will remain ineligible until she turns 60, unless she becomes disabled. Even after Lisa turns 60, her benefits would be subject to the earnings test until she reaches 67.

On the plus side, Morgan is eligible to receive a $2,078 (in 2018) monthly survivor benefit, based on her father's earnings history, until she turns 18 (19 if she attends school full time).

The earnings test and related calculations can be complicated. For instance, family maximums may apply. In Lisa's case, the estimated family maximum is $4,850 per month. If she had more children, each would be eligible for survivor benefits of $2,078 per month, up to this maximum, until each child turned 18.


Life insurance can help bridge the gap

The proceeds from life insurance can help make up the difference—and can be critical during a “blackout period" when a surviving spouse hasn't yet turned 60, but the children have reached 16, leaving the parent with no access to survivor benefits. For Lisa, whose daughter turns 16 in two years—when Lisa will be 52—this could mean eight years without benefits.

Many of us prefer not to dwell on the likelihood that bad things might happen to us or our loved ones. However, protecting against these risks can help provide peace of mind for you and your family. So given the dramatic impact the earnings test can have on survivor benefits, talk to your spouse about the role life insurance can play, and make sure you have enough coverage to protect your family if something happens to you.


What you can do next

Social Security survivor benefits can replace some of the income lost when a wage-earning family member passes away—but the “earnings test" can significantly reduce the amount the surviving spouse receives. The more you know today, the better you can plan for tomorrow.


Karen Kroll is a freelance writer and editor with a focus on consumer and corporate finance. Her articles have appeared in AARPBulletin.com, Bankrate.com, Business Finance, CFO, CreditCards.com, Global Finance and many other publications.


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