This Social Security Mistake Could Impoverish Your Spouse

Social SecurityPerhaps you're nervous that Social Security's coffers will run dry quicker than forecast. Or you're worried that your retirement will be cut short by an unforeseen illness. Maybe you just want to take your cash and run.

So for one of these reasons, you intend to apply for Social Security as soon as you're able.

You could be making a huge mistake.

In fact, taking Social Security benefits early could be a decision that eventually makes life difficult for your spouse.

Here's Why

You see, your spouse can receive a Social Security payment based on his or her own earnings record. But if your earnings were significantly higher over your career, then your spouse is also eligible for a "spousal benefit."

This "spousal benefit" equals 50% of the higher-earning spouse's Social Security benefit at full retirement age (for more specifics on your specific full retirement age, check out the Social Security Administration's website).

However, if the higher-earning spouse passes away, the surviving spouse is then entitled to receive 100% of his or her spouse's benefit in the form of a "survivor benefit." The surviving spouse simply waits until his or her full retirement age to be eligible.

Why Taking Social Security Early Could be a Disastrous Move

As I said, the survivor benefit is based on the amount the higher-earning spouse was receiving when he or she passed away.

Yet this number is not set in stone. If the higher-earning spouse chooses to wait until age 70 to receive his or her Social Security benefit instead of age 62, the monthly payments will be 76% higher, adjusted for inflation. And even if he or she passes away first, the spouse will confidently continue to receive this higher payout.

Which means that the important decision of when to begin receiving benefits not only affects your own quality of life, but also your spouse's when you're no longer around.

This is why experts advise that couples work together to maximize their Social Security income -- both for enjoying life together and for planning for the unfortunate reality that one spouse will likely outlive the other.

One of the most effective ways to achieve this is for the higher-earning spouse to delay benefits. So keep your spouse in mind as you plan for a wealthy retirement -- together, and when one of you is left on your own.

This article was written by Motley Fool analyst Adam J. Wiederman. Click here to read Adam's free report on the most effective tactics to ensure a wealthy retirement.

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However, if the higher-earning spouse passes away, the surviving spouse is then entitled to receive 100% of his or her spouse's benefit in the form of a "survivor benefit." The surviving spouse simply waits until his or her full retirement age to be eligible.

This article should be edited by someone that knows how to word things clearly. Once the spouse passes away, you get the OPTION to receive the amount the deceased earned or your own. NOT 100% of the spouse's benefit which can be read as both yours and theirs...

November 19 2012 at 5:04 PM Report abuse rate up rate down Reply

Note also the authors deceptively say that "The surviving spouse simply waits until his or her full retirement age to be eligible." That is ONLY true if the widow or widower wishes to draw 100% of what the deceased spouse drew. The earliest date a surviving spouse can get benefits off the deceased spouse's account is age 60 - far earlier than full retirement age.
People - the Social Security Administration is there to help you. Do you really want to take advice from someone whose sole motivation is to grab a piece of your money for their so-called, self-claimed "expert" advice? There are no hidden tips or tricks or the old crap of "things they don't want you to know". SSA's job is to help you make the best choice for your situation - they will do that, and you have already paid for their advice. And yes, everybody's situation is different, but in most cases, it is best for you to take your money as soon as you possibly can. Tomorrow is promised to no one!

May 24 2012 at 1:42 AM Report abuse rate up rate down Reply

Jedmann you will be entitled to half of what you spouse gets maybe more if he dies before your 60 any SS office can explane it to you or go to SS web site

May 24 2012 at 12:39 AM Report abuse rate up rate down Reply

It depends on the situation I elected to take it at 62 as I would have to live to 82 to break even and I can enjoy the money now more than later while we can still travel! Of course I have a good enough income from my investments that the SS money is only play money so I am enjoying life while my health is good,

May 24 2012 at 12:36 AM Report abuse rate up rate down Reply

Out of curiosity, my husband is on Social Security Disability. Right now our son gets 1/2 of his father's payment as a Dependent, What happens when our son turns 18? Can I have it switched over to me sine I am Dependent on this income? I cannot work as I am needed in he home to help care for my husband If we cannot do that, a large part of our income will be gone and our son will still be in school.

Also, what happens if my husband dies? Do I get a Survivor Benefit? How much is it? Or do I have to wait until retirement age? I am only 45

May 23 2012 at 11:05 PM Report abuse rate up rate down Reply

There may be a minority of people who would benefit from this advice but not the majority. My husband and I fall into the 2nd category, and there are a variety of reason why people benefit most from taking their SS$ early. We were high school sweethearts and were separated (not by our choice) when we were seniors in high school. We had been apart 36 years when he found me. We both had health concerns, and his type of work put a great deal of stress on his heart. We didn't know how long we would be together but decided to make the most of NOW - which is something I advise everyone to do. Money is only money. You need a lot to live like a wealthy person, but neither of us or anyone in our families had ever been wealthy. What we get with both our SS money by taking it at 62 plus his pension was a little less than we were used to living on, but the luxury of being together to enjoy what we have more than makes up for it. We're still able to travel a little every year and honestly, I wouldn't do it differently. Now I mentioned he has a pension as well. We're lucky that way. When he retired he set it up so that the pension only pays half what he is entitled to. If he should die before me (statistically it seems likely) I will still be entitled to the same amount from the pension that we get now. Do not for heavens sake rely on the thought that your SS will increase with a cost of living raise every year. We've just gone 3 years without that and what we got this year raised our amounts less than $10 a month. LESS than $10. I've read a lot of the Motley Fool articles, and with every one I am struck again at how uninformed and unrealistic they are. Please consider very carefully before taking their advice - or mine for that matter. Every case is different and only you can decide what is best for you.

May 23 2012 at 9:58 PM Report abuse rate up rate down Reply

The real reason the gov is making it sound bad if you collect your SS money at the earlier age is it puts more burden on the feds putting the money in the plan, the longer you work, the more you and your employer pays in. It is up to each person to plan and decide what their needs are and when can they retire and or draw their earned SS money, there seems to be enough to pay those other SS benefits.

May 23 2012 at 9:52 PM Report abuse rate up rate down Reply

Just believe me , go for early retirement if it is difficult for you to make ends meet. Yes, you may get less but it will ease your financial burden immensely and decrease your financial stress level ...I am happy I did, and so are the people around me who did the same.

May 23 2012 at 9:44 PM Report abuse rate up rate down Reply

You're assumptions are pretty grandios ... that people will be married happily their whole life, that they will stay together and not divorce (long shot!) or that they will be in the upper middle level of the wage scale. What about-- middle middle wage earners that are divorced or widowed have had set backs and haven't had a steady work record? I can't seem to understand your parameters except the ones that will work for your senerio which can not possiibly apply to even 10% of the work force.

May 23 2012 at 9:18 PM Report abuse rate up rate down Reply
Kevin byDesign

All great advice... unless your a gay couple... Then you have "no rights" to a spouses benefits. Married or domestic partnered Gay people can't file separately with their Federal returns; but "Must" file Jointly with the State. We are taxed at a higher rate than straight couples and denied over 1000 specific rights that our straight friends enjoy. A Marriage license's is a "Civil" document required by law. Last time I checked, tax exempt Churches don't issue Marriage Licenses? My advice to churches is if you want to stay "tax exempt" don't try to restrict the "civil rights" of others. Sorry for the Rant It may be off topic for some; but if you could not collect your spouses #SS and were tax at a higher rate than everyone else- How would you feel? You'd feel pretty much gay.

May 23 2012 at 8:46 PM Report abuse rate up rate down Reply