Stuart: I have a 61-year-old widow as a client. Her husband just passed away at age 62. His full retirement age benefit is $3,100 a month. The widow currently works, earning $40,000 per year. Her retirement benefit is worth $1,300 at her FRA but just $850 per month if she claimed at 62. What’s the best way for her to maximize her Social Security benefits?
MBF: Although the widow is eligible to receive survivor benefits now at age 61, she would be entitled to about 75% of her late husband’s full retirement age benefit, and that amount would be further reduced by her earnings. Or she could file for her own reduced retirement benefits at 62 and switch to her maximum survivor benefits at her full retirement age. However, the earnings restrictions could totally wipe out her meager retirement benefit.
If she waited until her full retirement age to claim her survivor benefits, when earnings restrictions disappear, they would be worth 100% of her late husband’s full benefit of $3,100 per month, compared to about $2,325 per month if she claimed them now.
The fact that she is working and therefore subject to earnings restrictions further complicates her decision about when to claim benefits.
In 2021, she would lose $1 in benefits for every $2 earned over $18,960. That means her earnings exceed the limit by $21,040, which would reduce her survivor benefits by $10,520. She would have to forfeit five months of benefits to satisfy the earnings restrictions this year before her survivor benefits would begin. Similar earnings restrictions would apply each year until she reached her full retirement age.
At that point, any benefits lost due to excess earnings would be restored at full retirement age but the reduction for claiming early would be permanent.
If her goal is to collect the largest possible survivor benefit, she should wait until her full retirement age to claim it. If she stops working before then, she may want to collect a reduced retirement benefit first and switch to her maximum survivor benefit at full retirement age.
Mary Beth Franklin, a certified financial planner, is a contributing editor for InvestmentNews.
From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.
Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.
“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.
Sellers shift focus: It's not about succession anymore.
Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.
RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.
As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.
