Q: I’m confused about when to ask for Social Security benefits. I’m a widow, and will soon be 62. My husband died at the age of 54. He would have been 62 in November 2011. Thanks to your article, I think I can ask for reduced benefits from his Social Security. When do I do this -- after his 62nd birthday, or a month ahead of time? I am working, making $36,000 a year, and barely able to pay my mortgage. Will I need to pay taxes on his benefits?
A: Your husband’s birth date, and the age at which he died, are irrelevant to the Social Security benefit you can claim as his widow. Your own age is what counts.
You have several options available to you. Call the Social Security Administration and make an appointment at one of its local offices. They’ll explain your choices and crunch the numbers to help you decide which one makes the most financial sense.
You are indeed entitled to a widow’s benefit based on your late husband’s Social Security – and you don’t have to wait until you turn 62 to claim it. Most people can claim a widow or widower’s benefit at 60, and some can obtain it even earlier. (A widow or widower who is raising minor children receives a survivor's benefit regardless of age. A surviving spouse who’s disabled can claim it at 50.)
But you’re right that if you file for it at 62, the amount you get will be reduced. And the reduction is permanent – i.e., you’ll always receive a smaller benefit than if you had delayed your application.
If you’re still working, there’s another drawback to filing for a Social Security benefit before your full retirement age: You may forfeit some of your benefit, depending on your salary. Social Security withholds $1 of benefit for each $2 you earn over $14,160 a year. After you reach full retirement age – in your case, age 66 -- you get your entire benefit regardless of how much you earn.
Here’s a rundown of the trade-offs you’ll want to consider:
To get the maximum widow's benefit -- 100% of what your late husband would have been entitled to at his full retirement age – you must postpone your application until you’re 66 years old. If you apply at 62, you receive about 80% of that amount.
You currently earn $36,000 a year -- $21,840 over the annual $14,160 limit. Let’s assume your reduced benefit at age 62 is $1,500 a month, or $18,000 a year. In this hypothetical example, Social Security would withhold $10,920 of your widow's benefit. You'd receive $7,080 a year, and it would arrive in the last five months of the year. (Do you ever get back the amount that was withheld? Yes, in a way -- after you reach full retirement age. But that’s a subject for a future post.)
Clearly, you have to know the actual dollars involved to figure out whether taking a discounted widow's benefit at 62 makes sense for you.
And that’s not your only decision.
As a widow or widower, you have an option that's unavailable to people with living spouses until after they turn 66: At 62, you can apply for your survivor’s benefit or for the Social Security benefit based on your own work record -- and switch from one to the other at a future date, as this earlier post explains. Again, the best choice depends on the actual dollars involved.
As for your question about taxes, take a look at my earlier post about how to determine if your Social Security benefit is taxable.
Please send your questions to Lynn@LynnBrennersFamilyFinance.com. I'm sorry I can't respond personally to every email. Questions are only addressed online.
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