Deciding when to claim Social Security retirement benefits is a complicated decision.
But when two people are in the mix — particularly a couple where one spouse is the primary breadwinner — the decision may be even more complex.
New research from Lafayette College takes a look at how Social Security benefits could better address the financial needs of these couples.
One answer, according to the research, would be to make spousal benefits slightly less generous in order to provide bigger survivor benefits later on should the primary earner pass away.
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The reason, according to Erin Cottle Hunt, assistant professor of economics at Lafayette, is that spousal benefits are not as useful to couples as survivor benefits.
“It’s really bad news for the wife if she has not worked and the husband dies and he isn’t around to get Social Security benefits anymore,” Cottle Hunt said.
That results in a “huge loss of income” that emphasizes the importance of survivor benefits.
“The benefit that pays her a widow benefit, the survivor benefit, that’s very important, and it has very large welfare gains associated with it,” Cottle Hunt said.
Spousal vs. survivor benefits
Spousal benefits let a husband or wife claim Social Security benefits based on their spouse’s work record. They may receive up to half of their husband’s or wife’s benefit based on their full retirement age. However, this may be reduced if the husband or wife claims early.
Survivor benefits generally make widow or widowers eligible for the retirement benefits the worker received at their time of death. The amount of these monthly survivor checks are also affected by when the primary earner decides to claim benefits.
To be sure, additional rules apply for both spousal and survivor benefits, especially with regard to the age of the spouse receiving the benefits, whether there are dependent children in their care and whether the couple is divorced, among other factors.
It’s best to check with the Social Security Administration if you have questions about your eligibility.
Today, almost 3.8 million non-disabled and disabled widows and widowers receive survivor benefits. About 2.1 million spouses of retired workers receive spousal benefits.
The average survivor benefit for those spouses may be as much as $1,559 per month, while the average spousal benefit is about $838 per month.
“If you just made the spousal benefit a tiny bit smaller and the survivor benefit a little bit bigger, the couples for whom those benefits are relevant would be made a little bit better off,” Cottle Hunt said.
Moreover, the change could be done in a budget neutral way, so as not to impact the funding shortfall Social Security currently faces, Cottle Hunt said.
Other research has also suggested the possibility of reducing Social Security spousal benefits in order to make survivor benefits more generous.
A 2018 report from the Center for Retirement Research at Boston College also incorporated the idea as a way to help prevent widows from living in poverty.
For widows ages 65 and up, the poverty rate was three times that of married women, the Center for Retirement Research found.
One key reason widows end up poor is due to a loss of retirement income. That includes cuts to a couple’s Social Security income, which are typically reduced anywhere from one-third to one-half.
“Overall, boosting the widow benefit — while limiting the size of the increase for above-average earners — appears to offer a well-targeted way to help reduce poverty for this vulnerable group,” the Center for Retirement Research report states.