Money Matters

Money Matters: Consider these rules before using Social Security survivor benefits

July 20, 2013 

Q. My husband recently passed away, and I know I can get Social Security survivor benefits at age 62 but I don’t want to do this if it will reduce my own benefits. Can I take survivor benefits now and then take my own at my full retirement age or even wait until I’m 70 without impacting my own benefit? Can I continue to work and receive benefits? Are Social Security benefits subject to any taxation?

When I contacted Social Security, the amount they told me I’d get as a survivor was just slightly lower than what my husband was receiving; I thought it would be much less since I’m younger than my husband.

I don’t want to take an amount now only to find out I’ve messed up my plan to delay my own benefits to receive a larger amount at 66 or 70. I don’t totally trust the Social Security representative with whom I spoke.

A. I’m sorry to hear of your husband’s passing. A widow or widower may receive a survivor’s benefit as early as age 60. This would be at a reduced rate because you have not reached your Full Retirement Age.

Additionally, if your spouse was receiving a reduced benefit because he began benefits prior to his FRA, the survivor’s benefit will be based on that lower amount. FRA for those born in 1947-48 is age 66.

So, the survivor benefit amount is based on earnings of the deceased but will be reduced if he took benefits prior to FRA and further reduced if you take benefits before your FRA.

If you are FRA or older when you take the survivor benefit you will receive 100 percent of your late husband’s benefit. If you take the survivor benefit anywhere from age 60 to FRA the reduction will be anywhere from 71 ½ percent (at age 60) to 99 percent (just before FRA).

You can receive the survivor benefit and then switch to your own benefit, if higher, at an unreduced rate if you switch at FRA or later.

If you are planning to work and are under FRA, for every $2 you earn over $15,120 in 2013 your benefits will be reduced by $1. In the year in which you reach FRA, benefits will be reduced by $1 for every $3 you earn over a larger earned income amount. For 2013 this earnings limit is $40,080 until you reach FRA. Beginning with the month you reach FRA there is no earnings limit. Benefits will not be reduced regardless of the amount you earn.

If your “combined income” is over a certain amount some of your benefits will be subject to Federal Income Tax, and depending on the state in which you live, some benefits may be subject to State income tax as well.

For Social Security benefits, combined income is the total of your adjusted gross income, non-taxable interest and half of your Social Security benefit. If you are filing as an individual and your combined income is between $25,000 and $34,000, up to 50 percent of your benefit is subject to taxation.

If you are married filing jointly and your combined income is between $32,000 and $44,000, up to 50 percent of your benefit is subject to taxation. If your combined income is over $34,000 for a single filer and if over $44,000 for joint filers up to 85 percent of your benefit will be subject to taxation.

Holly Nicholson is a certified financial planner in Raleigh. She cannot answer every question. Reach her at askholly.com or P.O. Box 97128, Raleigh, NC 27624

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