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Today’s question comes from Debbie:
I am currently 60 years old and working full time. My husband died in 2013, and I am wondering if I can collect on his benefits now?
2 reasons your benefit could be reduced
Debbie, there are numerous issues that arise when deciding to take widow’s or widower’s benefits. I will focus on one key aspect of this decision: How much money are you likely to receive now if you claim widow’s benefits at age 60?
When you claim a widow’s benefit at 60, the benefits can be reduced for two reasons. First, there is a penalty for taking benefits before full retirement age (FRA). The penalty in this case would be 28.5 percent. Thus, if your husband’s Social Security monthly benefit is $1,000, you would receive $715 monthly if you claim at 60 — that is, as long as you do not incur an additional penalty under the earnings test.
The earnings test is the second reason that your benefits might be reduced. In 2019, if you earn more than $17,640, Social Security will reduce your benefit by $1 for every $2 you earn over this amount. To extend the example above, suppose that you are earning $25,000. This is $7,360 above the exemption. So, your annual benefit will be reduced by half this amount, or $3,680. We can calculate the monthly reduction by dividing this number by 12, so the monthly reduction will be $307. In the end your benefit would be ($715-$307=) $408.
Earnings-test reduction is only temporary
While the discussion above focuses on benefits you would receive at age 60, one important aspect of the earnings test is that this reduction in benefits is only temporary. Once you reach FRA, the earnings test no longer applies.
Furthermore, I know this might seem strange, but Social Security will increase your benefit at FRA to pay back the penalty that has been imposed by the earnings test. The formula for paying back these penalties is a bit complicated, but our analysis suggests that if you live long enough, the amount of the penalty will be fully repaid.
Thus, the earnings test reduces your benefits today but does not necessarily hurt you in the long run.
Please note that there may be reasons to switch to your own benefits at a later date rather than continue to receive widow’s benefits. In that case, these paybacks based on the earnings test will not apply.
While this discussion has focused on the amount of benefits you will receive if you claim a widow’s benefit at age 60, a broader discussion of whether it is wise to claim widow’s benefits at age 60 is another matter, and depends on a number of individual factors.
I suggest that you look at the answer my colleague Russ Settle gave on widow’s benefits if you wish to review the range of claiming options that are available for a widow.
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About me
I hold a doctorate in economics from the University of Wisconsin and taught economics at the University of Delaware for many years. In 2009, I co-founded SocialSecurityChoices.com, an internet company that provides advice on Social Security claiming decisions. You can learn more about that by clicking here.
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Disclaimer: We strive to provide accurate information with regard to the subject matter covered. It is offered with the understanding that we are not offering legal, accounting, investment or other professional advice or services, and that the SSA alone makes all final determinations on your eligibility for benefits and the benefit amounts. Our advice on claiming strategies does not comprise a comprehensive financial plan. You should consult with your financial adviser regarding your individual situation.
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