Using annuities in trusts
A reference Trusts are an integral part of estate planning and funding a trust so that it meets the needs of a client’s estate and wealth transfer goals involves a...
Read more about Using annuities in trustsWhen it comes to planning for death or the passing of a loved one, there are common things we do such as making sure you’re covered by life insurance, funeral pre-planning, and securing your will. Many other things can be overlooked through the stress of emotionally and financially planning for the death of a spouse.
While it may be a difficult topic to discuss, it’s important to understand and consider survivor benefits within your overall filing strategy.
The amount that a surviving spouse gets varies based on a variety of factors. One of the main factors that go into how much the surviving spouse will receive is when they decide to start receiving social security benefits. It can be very tempting to start receiving your social security benefits at full retirement age or earlier but doing so could cause you to leave money on the table in the long run.
When a spouse passes away, the household needs to consider the drop in overall income. Choosing to wait longer to take the spouse who makes more money’s social security benefit would benefit the surviving spouse, leaving them with more money after their partner passes away.
To try and simplify things for you, below are a few examples of how much a surviving spouse would get if they waited for full retirement age.
For this example, let’s assume Bob and Mary both waited until full retirement age to claim social security. Bob’s social security benefit was $3,000/month, while Mary’s benefit was $2,000/month. Combined, they are receiving a benefit of $5,000/month. If Bob passed away in a few years, Mary would receive Bob’s $3,000/month as her survivor benefit. Her overall benefit would drop as she would lose her $2,000/month, but she would receive the higher of the two amounts and begin receiving Bob’s $3,000/month as her survivor benefit.
While in that example, we assumed both Bob and Mary waited until full retirement age to claim, what would have happened if they would have claimed before full retirement age? Both Bob and Mary would have a lower monthly benefit by choosing to claim a few years early. If Bob passes away, Mary’s survivor benefit is now lower, since they didn’t wait until full retirement age.
When planning for retirement it’s best to think through all the scenarios to make sure you get the most out of all the benefits that you’ve worked so hard for throughout your life. While it may feel like you are receiving a greater benefit initially, you could be hurting yourself or your spouse in the long run when it comes to the amount of benefits they will be receiving.
After reading through the above example you might be left with more questions about social security and when you can begin to receive your benefits. Everybody is different and the decision is ultimately theirs to make, but you want to make sure you have all the information you need to make an informed decision yourself.
A surviving spouse is eligible for 100% of benefits at full retirement age or older. The chart below shows an easy breakdown of what your FRA (Full Retirement Age) is, based on your birth year.
Birth Year | Full Retirement Age |
---|---|
1937-1954 | 66 |
1955 | 66 + 2 months |
1956 | 66 + 4 months |
1957 | 66 + 6 months |
1958 | 66 + 8 months |
1959 | 66 + 10 months |
1960-later | 67 |
Source: When to Take Out Social Security
When dealing with social security survivor benefits specifically, there are a few qualifications needed to be eligible to receive benefits:
In addition to survivor benefits, there are a few other categories of people who are eligible to receive what is called Dependent or Disability benefits.
Each person and couple are different and there is no one-size-fits-all approach when it comes to taking your social security. Learn more about when you are eligible to receive your retirement benefits.
It can often be easier discussing your retirement planning with a qualified financial professional who knows the ins and outs of the system and can help with your unique situation and circumstances. Find a financial professional who can help with your retirement planning.
Disclosure: Federal income tax laws are complex and subject to change. The information provided is based on current laws, which are subject to change at any time, and has not been endorsed by any government agency.
Neither Nationwide, nor its employees, its agents, brokers or registered representatives gives legal or tax advice.