Jim: I have a client who was recently widowed. She is a teacher in a school district that does not participate in Social Security. She will turn 65 next March and plans to retire at the end of the school year in spring 2021. Her husband was collecting about $1,600 per month in Social Security benefits when he died last month at age 67. She and her husband were legal guardians of their grandson, age 14.
I know her widow’s benefit will be reduced by the Government Pension Offset rule once she starts drawing her pension, but will it affect her grandson’s survivor benefit?
MBF: The grandson’s dependent benefit should automatically increase from 50% of the deceased grandfather’s full retirement age benefit to 75% of the amount the grandfather was receiving at the time of his death. The grandson is entitled to dependent benefits until he turns 18 or 19 if he is still in high school.
The grandmother’s earnings and pension offset will not affect the child’s benefit. But deciding when to claim her survivor benefit is tricky and you’ll have to crunch some numbers.
If she waited to claim benefits in July 2020 after she retires, she would avoid any benefit reductions due to the earnings test. Even if she earned more than the annual earnings limit before retiring, she would not forfeit any Social Security benefits if she had little or no earned income once she claimed Social Security.
But the main question is when will she start collecting her Texas teacher’s pension? She will be 65 by the time she retires next year and entitled to full pension benefits. Depending on the amount of her pension, it may not make sense to delay claiming it just to avoid a reduction in Social Security survivor benefits once her pension begins.
Mary Beth Franklin, a certified financial planner, is a contributing editor for InvestmentNews.
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