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Financial Planning for Widows: Maximizing Pension and Social Security Benefits

When navigating widowhood, thinking about your future financial well-being may be stressful. Even if you feel confident with the funds you currently have, or were left to you when your spouse passed away, you may still have many different questions keeping you up at night:

  • Will my inheritance and savings sustain me through retirement and my old age?
  • What should I do with my spouse’s pension benefits?
  • Do I need to take Social Security earlier than I had planned? Will taking my spouse’s survivor benefits impact my own? 

Pension and Social Security benefits can be confusing even during the best of times. Trying to figure out how survivor benefits impact your cash flow as a widow can often raise more questions than it provides answers.

Today, we’ll cover the basics of each and set you up to make empowered decisions about taking your benefits during this chapter of your life.

Know Your Rights: Social Security Benefits

You can receive survivor benefits from the Social Security Administration if you’re a surviving spouse. Survivor benefits are typically calculated using a tiered system based on your age:

  • Full retirement age or older — 100% of the deceased worker’s benefit amount
  • Age 60 — through full retirement age — 71½ to 99% of the deceased worker’s basic amount
  • Aged 50 through 59 with a disability — 71½%
  • Any age, caring for a child under age 16 — 75%

It’s important to note two key factors  when calculating your survivor benefits:

  1. If you remarry before age 60, you are no longer eligible for survivor benefits from your deceased spouse.
  2. There is a “maximum family amount” of survivor benefits that can be distributed. For example, if you have minor children who receive benefits, you receive benefits, and a dependent parent receives benefits, you may be limited to 150-180% of the deceased spouse’s benefit rate. If the “payable” benefits are larger than the benefit rate, the total benefit amount will be reduced accordingly. 

Do Survivor Benefits Impact My Social Security?

If you’re eligible for Social Security, you can switch away from your spouse’s survivor benefits to receive your benefits as early as age 62. You can’t combine your benefits with survivor benefits for increased cash flow. Most widows opt to take the benefit with the highest total payout. For example, you may take a reduced surviving spouse benefit starting at age 60, then switch to your own (higher) benefit at age 62 when you qualify. 

Pension Benefits & Survivor Options

If your spouse had a pension, you may be eligible for survivor benefits here, as well. In general, when an employee retires with a pension, they have a few options for how they can receive their benefit:

  1. Lump sum.
  2. Joint and survivor.
  3. Single life.

With a lump sum or a single life payout, your spouse would have either received the full pension benefit in one go or have it dispersed throughout their retirement for the rest of their lifetime.

However, if they selected a joint and survivor option, you may be eligible for a percentage of their monthly benefit payment for the rest of your life. Usually, joint and survivor options pay 50%, 75%, or 100% of your spouse’s benefit after they pass away for the rest of your life. This comes with the tradeoff of a reduced monthly benefit payment while your spouse is still alive but can help take care of you in the long term. 

Coordinating Your Benefits To Create Cash Flow

In general, cash flow comes from a few different places both before and after retirement:

  • Regular salary or income from retirement savings
  • Pension benefits
  • Social Security benefits
  • Inheritance or other “windfalls”

If you are a surviving spouse, you have a unique challenge to balance your traditional cash flow with potential pension or Social Security benefits, a lump-sum inheritance or life insurance payout, and a potential influx in assets in your spouse’s name. Although this may feel overwhelming in the short term, in the long run, it presents several financial opportunities for you. 

Although there’s no one “right answer” when it comes to organizing your cash flow and benefits, a solid first step to take is to understand: 

  1. Where your cash flow in this new season of life is coming from
  2. How it’s taxed

Once you have this information, you can determine the best way to disperse income, save, and invest to pave the way for the next chapter, all in harmony with your unique goals and values. 

Resources & Tools

Looking for additional resources to navigate your Social Security and Pension survivor benefits? Start by checking out the Social Security benefits calculators available on the SSA website or this pension calculator from Bankrate. Of course, you can also reach out to our team for additional assistance – we’re happy to help!