Social Security retirement benefits provide guaranteed monthly income for the duration of your retirement.
But when you die, your checks stop coming.
“You only get Social Security while you’re alive,” said Bruce Tannahill, a director of estate and business planning with MassMutual.
Surveys show retirees are tempted to claim benefits as early as possible to get the most out of the program.
But financial advisors typically suggest the opposite — waiting to claim to get the biggest benefit. That way, you get the biggest monthly checks potentially available to you.
“People need to take into account how important Social Security is in their estate planning,” said Jim Blair, vice president of Premier Social Security Consulting and a former Social Security administrator.
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For example, if you claim retirement benefits at age 62, your benefits are reduced, and so are the survivor benefits that become available when you die, Blair said. If you wait to claim benefits until age 70, the maximum age until which you can delay monthly Social Security retirement checks and see your benefits increase, the survivor benefit is also increased.
What’s more, that added income may help you preserve other assets that you can leave behind.
“Your other wealth you can pass on to your spouse and other children and your loved ones,” Tannahill said.
There are some key takeaways to know about what happens to Social Security benefits in the event you or a loved one passes away.
1. There is a one-time death payment
A one-time lump-sum death payment of $255 may be available, provided certain requirements are met.
For example, a surviving spouse may be eligible for the death payment if they were living with the person who passes away.
If the spouse was living apart from the deceased, but was receiving Social Security benefits based on their record, they may also be eligible for the $255 sum.
If there is no surviving spouse, children of the deceased may instead be eligible for the payment, so long as they qualify to receive benefits on their deceased parent’s record when they died.
The Social Security Administration should be notified as soon as possible when a beneficiary dies to cancel their benefits. Funeral homes often report a death to the agency. But it would be wise to also report it to the Social Security Administration, Blair said.
2. Benefits for the month of death must be returned
Though a one-time death payment may be available, any benefit payments received by the deceased in the month of death or after must be returned, according to the Social Security Administration.
However, how this rule is handled depends on the timing of the death.
Social Security checks are paid for the benefits earned the month before. The schedule of the monthly Social Security payments depends on a beneficiary’s date of birth, and mostly fall on either the second, third or fourth Wednesday.
If someone receives their monthly Social Security payment and then dies, the Social Security Administration may not take the money back, according to Blair.
But if instead the beneficiary dies and then receives their monthly Social Security check, it may have to be paid back, he said.
The Social Security Administration cautions against cashing any checks or keeping direct deposits received in the month of death or later.
If a deceased beneficiary was due a Social Security check or a Medicare premium refund when they died, a claim may be submitted to the Social Security Administration.
3. Surviving spouses, others may be entitled to benefits
Certain family members may be eligible to receive survivor benefits based on the deceased beneficiary’s earnings record starting as soon as the month they died, according to the Social Security Administration.
That may include a surviving spouse age 60 or older.
When both spouses have claimed Social Security benefits and one dies, the rule of thumb is the larger benefit continues and the smaller benefit goes away, according to Joe Elsasser, a certified financial planner and president of Covisum, a Social Security software claiming company.
But there can be pitfalls, particularly for couples who have been together for years but never married, he noted.
Some states will treat those unions as common law marriages, which are recognized by the Social Security Administration. However, other states may have no such arrangements, which means survivor benefits would not be available to the living partner should their significant other die.
In many cases, Elsasser said he would recommend those couples get married, particularly when one member of a couple has a very high Social Security benefit and the other doesn’t. Of course, marriage does not always make sense financially for all couples, he said.
Another pitfall may emerge for younger widows who remarry at age 59, for example.
“That could be a very bad thing, because it can prevent you from accessing the widow benefit under your ex,” Elsasser said.
If instead someone remarries after age 60, they are still entitled to a survivor benefit from a deceased spouse, according to Blair.
Others who may be eligible for benefits on a deceased beneficiary’s record include:
- A surviving spouse 50 or older who has a disability
- A surviving divorced spouse if they meet certain qualifications
- A surviving spouse who is caring for a deceased’s child under age 16 or who has a disability
- An unmarried child of the deceased who is under 18, or up to 19 if they are a full-time elementary or secondary school student, or age 18 and older with a disability that began before age 22.
“Divorced widow benefits are actually one of the most frequently missed benefits by people because they don’t know they’re available,” Elsasser said.
For example, if you’re 70 and were divorced 20 years ago, you may not know that your ex has died, nor think to check with the Social Security Administration to see if their benefit would be higher, he said.
Importantly, the Social Security Administration will not notify you those benefits are available, Elsasser said.
In certain circumstances, other family members may be eligible for survivor benefits, including adopted children, stepchildren, grandchildren or step-grandchildren.
Parents age 62 or older may also be eligible for benefits if they were a dependent of the deceased for at least half of their support.
A family maximum limits how much can be collected when there are multiple family members claiming on one record, such as a surviving mother and three children, according to Elsasser. However, this rarely affects retirees, because exes do not count as part of a family maximum, he noted.
Additionally, in some cases an earnings test threshold may offset the amount of benefits you receive if you also have earned income.
Important tips for survivors to keep in mind:
- Claimants may want to file a restricted application. It is possible to claim a widow’s benefit while letting your own retirement benefit grow, or vice versa, according to Elsasser. For example, you may claim a widow’s benefit at 60, and then switch to your own retirement benefit at age 70.
- Social Security can provide a “benefit matrix” comparing benefit options. The document may show you how your monthly benefit and your survivor benefits compare. “We always tell folks, if they’re looking to determine the best course of action between their own benefit and or a surviving spouse benefit, contact SSA and get the benefit matrix report that will give you the information you need to make a decision,” said Marc Kiner, president of Premier Social Security Consulting.
- Social Security will not tell you what strategy will give you maximum lifetime benefits. While Social Security personnel may tell you how to get the highest benefit on the day you visit an office or call, they will not necessarily tell you how to get the maximum benefits over your lifetime, Elsasser said. Consequently, it is best to seek more personalized outside advice to identify the best strategy for your situation.