On Retirement

Inaccurate info from Social Security Administration a challenge for widows

Stresses of losing spouse include steep decline in household income for many, according to a survey

Sep 12, 2018 @ 11:25 am

By Mary Beth Franklin

Losing one's spouse is one of life's most difficult and overwhelming experiences. Claiming Social Security survivor benefits apparently ranks as a close second based on a frantic phone call I received from a close friend this week.

My friend was widowed 20 years ago when her husband died suddenly of a massive heart attack at age 44 during a Saturday morning racket ball game. She was left with a toddler and a teenager, half of their former income and too little life insurance.

Now 64, she has decided to retire from her position as a corporate sales executive next January. Her financial adviser wisely urged her to claim her Social Security survivor benefits once she stops working and then switch to her own retirement benefits at age 70, when they would be worth the maximum amount.

But in three separate phone calls, Social Security Administration representatives told my friend she was not entitled to survivor benefits because her own retirement benefits were larger.

Each SSA agent cited new "deemed filing" rules that require anyone who was born after Jan. 1, 1954, to file for all available Social Security benefits at time of claim. People born after that date are no longer permitted to claim one type of benefit first and switch to the other later, the agents told her.

The only problem with that advice is that the deemed filing rules do not apply to survivor benefits.

"Deemed filing applies to retirement benefits, not to survivor's benefits," according to the Social Security webpage (https://www.ssa.gov/planners/retire/claiming.html) that explains the impact of the new rules authorized by the Bipartisan Budget Act of 2015. "So, if you are a widow or widower, you may start your survivor benefit independently of your retirement benefit if you restrict the scope of your application."

I suppose the bad advice shouldn't surprise me. Earlier this year, an internal SSA report found that agency representatives gave widows and widowers incorrect guidance 82% of the time based on a random sample of claims by surviving spouses who were also entitled to claim their own retirement benefits.

Don't get me wrong. Social Security has already played an enormous and essential role in my friend's life. The dependent benefits for the two kids were a godsend as she struggled to rebuild her life and her finances. And my friend was pleasantly surprised to learn that her survivor benefit was much bigger than she had expected, given her husband's abbreviated lifetime earnings.

I sent my friend links to the Social Security website documenting her benefit options and told her to print them out and take them with her when she files a claim for survivor benefits, which she must do in person.

Her widow's benefit would be about $2,000 per month at her full retirement age of 66 and a little less if she claims next year at 65. Meanwhile, her own retirement benefit of about $2,600 per month would continue to grow by 8% per year if she postponed claiming it beyond 66 until age 70, boosting the amount by 32%, to about $3,432 per month. Even though she plans to claim reduced survivor benefits early, it will not affect her retirement benefits, which will continue to earn delayed retirement credits between ages 66 and 70.

My friend is in good company when it comes to dealing with the stress of widowhood, even decades after the death of her husband.

A new survey from Merrill Lynch and Age Wave details the financial challenges and complexities of widowhood. The report, "Widowhood: The Loss Couples Rarely Plan for -- and Should," is based on a nationwide sample of 3,300 respondents, including 2,638 widows and 741 married, never-widowed respondents. There are currently 20 million widows in the U.S., and 1.4 million new widows are added annually, so the research offers some valuable insights.

More than three-quarters of the widows — 78% — described becoming a widow as "their single most difficult and overwhelming life experience," and 53% said they and their spouse did not have a plan for what would happen if one of them passed away.

Half of the widows experienced a decline in household income of 50% or more. At the same time, widows also face the complex task of juggling multiple incoming assets, including Social Security survivor benefits, life insurance, their spouse's pensions and retirement savings.

For four in ten women, widowhood is a trigger to begin working with a financial adviser, according to the survey.

The widows in the survey also had some advice for financial advisers. More than two-thirds (69%) said advisers shouldn't pressure widows into making decisions quickly. They also urged advisers to spend more time listening than talking and to assign a single point of contact to help widows navigate the process.

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