Understand your social security options to maximize your earned benefits
Social Security was originally intended to provide retired workers income for the rest of their lives. Today, Social Security benefits expand to not just the retired worker, but also can be paid to their qualifying dependents.
Most people think of Social Security as a retirement benefit, but it also provides benefits to qualifying survivors of deceased, insured workers.
Survivor Benefit Qualifications: The type of Social Security paid benefits depends on whether a worker is fully insured or currently insured at the time of death.
• Fully insured:
To be fully insured, a worker must have earned 40 Social Security credits by working 10 years in covered employment where the earnings were subject to Social Security tax (OASDI) and the Medicare (HI) tax. If the work was less than 10 years, an alternative test can determine fully-insured status.
For the fully insured worker, benefits may be paid to:
A divorced spouse?
A dependent child or children?
A dependent parent or parents?
• Currently insured: To be currently insured, a worker must have earned at least six Social Security credits during the 13-quarter period ending in the quarter when the death occurred. For fully insured worker, benefits may be paid to:
A divorced spouse
A dependent child or children
Primary Insurance Amount (PIA)
The amount of Social Security benefits generally depends on a worker’s lifetime earnings. The Social Security Administration uses this earnings record to calculate the PIA and uses it to determine the dollar amount of the payable benefit.
Surviving Family Benefits
Benefits payable to qualified surviving family members:
• Mother’s or Father’s benefits:
The surviving spouse, or surviving divorced spouse, who is caring for the deceased worker’s children, under age 16, or if disabled before age 22, receives a monthly benefit of 75% of the PIA at any age. The benefit ends if the deceased doesn’t have children or if they are over the qualifying ages. The worker could have been fully or currently insured at the time of death.
• Child’s benefits:
A deceased worker’s dependent children can receive a monthly benefit of 75% of the PIA. The children must be under age 18, age 18 or 19, and a full-time elementary or high school student, or 18 or over and disabled before age 22, and unmarried. In general, the child’s benefit ends when the child dies, reaches age 18 and is neither disabled nor a full-time elementary or secondary student, or marries. The worker could have been either fully or currently insured at the time of death.
• Widow or Widower’s benefit:
The surviving spouse or surviving divorced spouse receives a monthly benefit of 100% of the worker’s PIA. They must be age 60 and over or disabled and at least age 50, but not age 60. They also can’t be entitled to a retirement benefit equal to or larger than the worker’s PIA, and not married. A surviving spouse must have been married to the deceased worker for at least nine months before the worker died. Or they fit one of a many situations relating to being a parent of the deceased worker’s children. A surviving divorced spouse should have been married to the deceased for 10 years just before the date the divorce became final. The worker must have been fully insured at the time of death.
• Parent’s benefit:
If one of the deceased worker’s parents qualifies, he or she will receive 87.5% of the PIA, or if two parents qualify then each parent will receive 75%. The parent must be:
At least age 62, not entitled to a retirement benefit equal to or larger than the amount of the unadjusted parent’s benefit after any increase to the minimum benefit, receiving at least half of his or her support from the deceased, reported this support to the Social Security Administration,
the support met the requirements, and was within two years of the deceased worker’s death.
The worker must have been fully insured at the time of death.
• Lump-sum payment:
One-time, lump-sum payment of $225 is generally paid to a surviving spouse, living with the deceased as husband and wife, in the same household. If there is no spouse, the payment is made to the children of the deceased. When there is more than one child, the lump-sum payment is divided equally. The worker could have been either fully or currently insured at the time of death.
Maximum Family Benefit
When the total benefits of a deceased worker’s Social Security account exceeds certain limits, the dollar amounts, for all beneficiaries, except for a surviving divorced spouse, are proportionately reduced to meet the family maximum limit.
Social Security Benefit Federal Income Tax
Social Security benefits may be subject to income tax. When half of the Social Security benefit and the modified adjusted gross income exceed a specified limit, then a portion, up to 85%, of that benefit is taxable. For married couples filing joint, the limit is $32,000, for most others it’s $25,000. For those married couples filing separately and who lived with their spouse at any time during the year, the limit is $0. State or local income taxes on Social Security benefits vary.
Excess Earnings Benefits Reduction
Normal Retirement Age (NRA), also referred to as “Full Retirement Age” (FRA), is the age when you can receive your “full” retirement benefits, or 100% of the PIA. For people born in or earlier than 1937, the NRA is 65. For those born in 1960 or later, the NRA gradually increases until age 67.
If you begin getting Social Security survivor’s benefits before reaching NRA, and you also work and your earnings exceed certain limits, your survivor’s benefit will be reduced temporarily. In this case, earnings include employment wages or self-employment net income. The amount reduction is calculated on a monthly basis and varies depending on your current age in relation to your NRA:
• Under NRA: $1 of benefits is lost for every $2 earned over $14,160 yearly or $3,150 monthly.
• NRA calendar year reached: $1 of benefits is lost for $3 dollars earned over $37,680 per year or $3,140 a month.
• At NRA: Once NRA is reached, and individuals’ benefit is not reduced no matter how much is earned.
Verify Social Security Records
Because the Social Security benefits are based on your lifetime earnings history, it is important to check your SSA records’ accuracy. The SSA sends annual statements to every worker age 25 and over. This statement includes your earnings record and the estimated benefits amounts.
You can also check your records by completing Form SSA-7004, Request for Social Security State.” The completed form can be mailed to the Social Security Administration, P.O. Box 7004, Wilkes-Barre, PA 18767-7004.