Navigating government benefits, such as Social Security, can often be challenging and perplexing. A lack of information and understanding may prevent Americans from all age groups from effectively planning for their financial future, potentially leaving valuable benefits unclaimed.
Social Security benefits extend beyond just retirees. They are also available to children, divorced spouses, and individuals with disabilities, provided they meet certain eligibility criteria.
As of August 2024, statistics show that 2.5 million Americans receive spousal benefits, while more than 5.5 million receive survivor benefits. Understanding the eligibility, potential amount receivable, and optimal timing for claiming spousal and survivor Social Security benefits is crucial to maximizing these government entitlements.
Spousal and Survivor Benefits Complexities
Although some individuals are aware that spouses of Social Security recipients are entitled to benefits, the specifics regarding the amount they can receive are often unclear. Survivor benefits involve complex rules that could affect retirement planning, especially if benefits are overestimated.
Spousal benefits: An individual must be at least 62 years old to qualify, and the maximum amount receivable is half of their spouse’s benefit at full retirement age. Other criteria include not having paid into the Social Security system for 30 full-time working years or having a spouse who receives a higher benefit.
Survivor benefits: To qualify, individuals must meet specific age and marital status criteria, including being at least 60 years old (or 50-59 if disabled), being married for at least nine months before the spouse’s death, and not remarrying before age 60. Ex-spouses married for at least ten years, children under 18, or disabled children of any age, are also eligible. By delaying claiming benefits until age 67, survivors can receive 100% of the deceased family member’s full Social Security amount.
Insights from Leslie Thompson
Leslie Thompson, CFA, and chief investment officer at Spectrum Wealth Management, highlights common misconceptions about Social Security and advises on strategic financial planning for workers, women, and retirees. Thompson emphasizes the significance of understanding full benefits before delaying Social Security until age 67. She clarifies that individuals are entitled only to the higher of Social Security or survivor benefits, influencing retirement timing decisions for spouses based on longevity and risk factors.
Adjusting Financial Strategies in Retirement
Thompson advises retirees to be vigilant about cash flow and asset allocation due to diminished income during retirement. She underscores the importance of budgeting to ensure expenditures remain within financial means. Creating a budget based on anticipated retirement income and adhering to it can help identify necessary spending adjustments.
For those nearing retirement, acting as though already retired can provide realistic insight into budget constraints. Evaluating spending and exploring cost-saving measures, such as cheaper medications, can significantly affect finances.
Thompson also points to the need for retirees to reassess portfolio asset allocations considering inflation and fluctuating interest rates. Taking on additional risk and increasing exposure may be necessary to maintain financial balances and purchasing power. Women, particularly, should be aware of inflation’s impact on their portfolios due to generally having longer life expectancies.
Thompson concludes by stating that current economic conditions may necessitate adjusting asset allocations to preserve financial stability in retirement.
