Fortunately, if you worked only for private employers and paid Social Security taxes (FICA) at each job, you’ll get to keep your full pension and full Social Security benefits. You’ll only see a reduction in Social Security if you worked in the private sector and for the government or another employer who didn’t pay Social Security taxes.
Here’s how to know whether you’ll lose benefits because of your pension and how the benefit reduction works.
The 1983 Windfall Elimination Provision (WEP) requires the Social Security Administration (SSA) to reduce your benefits if you have a pension from any employer that didn’t withhold FICA taxes or pay into the Social Security system, such as:
If your pension comes from a job where you paid FICA taxes or self-employment taxes, the WEP won’t change your Social Security benefits.
Social Security calculates benefits so that low-wage workers receive a higher percentage of their lifetime earnings than high-wage workers. High-wage earners still get more benefits, but it’s a smaller portion of the wages they received when working.
Your Social Security disability or retirement benefits are based on your average monthly earnings over your lifetime (35 years). The SSA determines your benefit by dividing your average monthly earnings into three “bend points” (which change every year based on average wages). The agency then multiplies each bend point by a percentage (90%, 32%, and 15%) and then adds up the amounts to get your primary insurance amount (PIA). Your PIA is the amount of benefits you’re entitled to receive. (Learn more about how Social Security determines how much your benefits will be.)
For someone who becomes eligible for benefits in 2024, the bend point calculations would be:
Before the WEP, this resulted in people with full-time government jobs and relatively little private sector work receiving higher Social Security benefits because they were calculated as if they were long-term low-wage workers. So they could get a full government pension and Social Security benefits equal to 90% of their private sector earnings.
In 1983, the WEP changed that by requiring Social Security benefits to be offset based on pension amounts.
The formula used to calculate how big a bite will be taken out of your Social Security benefit due to the WEP is complicated. Basically, Social Security reduces the 90% multiple for the first bend point based in part on when you reached age 62 or became disabled. If it was in 1990 or later, the 90% factor could be reduced to as little as 40%.
If you have a very small government pension, however, Social Security won’t reduce your retirement or disability benefits by more than half the amount of your pension.
You can estimate how much your Social Security benefits will be reduced by your pension under WEP rules using the online calculator at SSA.gov.
Under a separate law, the Government Pension Offset (GPO) rule, your government pension will reduce any spouses, widows, or widowers benefits you can receive from Social Security. The GPO reduces Social Security spousal or survivor benefits by two-thirds of the amount of your pension. But there’s no reduction to your Social Security benefits if the government pension you’re getting isn’t based on your own earnings (for instance, if you inherited it from your late spouse).
For more information, see Social Security's brochure on the Government Pension Offset.
The WEP rules don’t apply if your only government work was under the Federal Employees’ Retirement System (FERS) or a similar program where you paid Social Security taxes on your income. But the WEP offset applies to any pension you earned as an employee of the federal government after 1956 under the Civil Service Retirement System (CSRS).
You also won’t have a WEP reduction of your Social Security benefits in the following situations:
The WEP offset rules also change if you worked for a number of years at jobs paying Social Security taxes.
Social Security won’t reduce your retirement benefits if you have 30 or more years of "substantial earnings" on which you paid Social Security taxes. The agency will continue to use the 90% factor in its monthly benefit formula.
What qualifies as substantial earnings changes each year, but for 2024, it’s $31,275. (See the table below.)
Year |
Substantial Earnings |
Year |
Substantial Earnings |
Year |
Substantial Earnings |
1937–1954 |
$900 |
1986 |
$7,875 |
2005 |
$16,725 |
1955-1958 |
$1,050 |
1987 |
$8,175 |
2006 |
$17,475 |
1959-1965 |
$1,200 |
1988 |
$8,400 |
2007 |
$18,150 |
1966-1967 |
$1,650 |
1989 |
$8,925 |
2008 |
$18,975 |
1968-1971 |
$1,950 |
1990 |
$9,525 |
2009-2010 |
$19,800 |
1972 |
$2,250 |
1991 |
$9,900 |
2011 | $19,800 |
1973 |
$2,700 |
1992 |
$10,350 |
2012 |
$20,475 |
1974 |
$3,300 |
1993 |
$10,725 |
2013 |
$21,075 |
1975 |
$3,525 |
1994 |
$11,250 |
2014 |
$21,750 |
1976 |
$3,825 |
1995 |
$11,325 |
2015 |
$22,050 |
1977 |
$4,125 |
1996 |
$11,625 |
2016 |
$22,050 |
1978 |
$4,425 |
1997 |
$12,150 |
2017 |
$23,625 |
1979 |
$4,725 |
1998 |
$12,675 |
2018 |
$23,850 |
1980 |
$5,100 |
1999 |
$13,425 |
2019 |
$24,675 |
1981 |
$5,550 |
2000 |
$14,175 |
2020 |
$25,575 |
1982 |
$6,075 |
2001 |
$14,925 |
2021 |
$26,550 |
1983 |
$6,675 |
2002 |
$15,750 |
2022 |
$27,300 |
1984 |
$7,050 |
2003 |
$16,125 |
2023 |
$29,700 |
1985 |
$7,425 |
2004 |
$16,275 |
2024 |
$31,275 |
If you have 20 or fewer years of substantial earnings, you'll still get hit by the offset, and the 90% factor will be reduced to 40% in determining your monthly benefit.
The good news is that if you have 21 years of substantial earnings or more (but fewer than 30), your benefits will still be reduced, but the percentage used to calculate your monthly benefit is reduced progressively. So, at 30 years or more, the percentage is 90%, but it drops 5% for each year less than 30, as follows:
Number of Years |
Percentage |
29 years |
85% |
28 years |
80% |
27 years |
75% |
26 years |
70% |
25 years |
65% |
24 years |
60% |
23 years |
55% |
22 years |
50% |
21 years |
45% |
20 years or less |
40% |
One more bit of good news: if your Social Security benefits are reduced due to WEP (or GPO), the offset won’t affect your eligibility for Medicare. You can still get Medicare based on your spouse’s work record, even if your pension makes you ineligible to receive any Social Security benefits.
For more information, see Social Security's brochure on the Windfall Elimination Provision.
Updated March 22, 2024
]]>The Social Security Administration (SSA) has put an end to some of the strategies that married couples had used in the past, but spouses nearing retirement age still have many questions about how to get the highest possible joint Social Security benefits.
Here are some answers to your questions and a few tips on how to avoid mistakes that could reduce your benefits.
Yes, both spouses in a married couple can get full Social Security benefits at the same time. Married couples get two separate Social Security checks, and there is no “marriage penalty” for Social Security benefits.
The maximum Social Security benefit for an individual is $3,822 (in 2024), so the maximum Social Security benefit for a married couple is $7,644—but very few people get benefits anywhere close to the maximum. How much of a retirement benefit you'll receive depends on the amount of your salary or wages over your lifetime.
For most couples now reaching retirement age, both husband and wife, or both spouses, have earned some Social Security retirement benefits on their own earnings records. That means that each spouse can claim dependents benefits based on the other spouse’s work record, as well as survivor benefits based on the work record of the spouse who dies first.
Any time after each spouse reaches age 62, that spouse can claim retirement benefits. If one spouse claims retirement benefits, the other spouse may want to delay claiming their own retirement benefit, to let it grow. (Social Security penalizes people for collecting their retirement benefits early.) Sometimes couples can withdraw money from other retirement accounts, like IRAs and 401(k)s, to be able to delay collecting their Social Security benefit until age 67 or age 70.
In the past, once reaching full retirement age, a spouse could claim their spousal retirement (dependents) benefits without claiming their own retirement benefit. This was called "filing a restricted application." But that option is no longer available to people.
Today, when someone files an application for any type of retirement, spousal benefit, or dependent benefit, Social Security considers it to be an application for the highest benefit available. Often, the highest benefit is their own retirement benefit, but in some cases, the highest benefit might be their spousal retirement benefit (dependents benefit). Social Security will always pay you the highest benefit available when you file a claim.
No, your claiming early retirement benefits does not reduce the amount of your spouse’s spousal benefits or your child’s dependents benefit amount that they can collect on your work record. But your claiming early retirement benefits will reduce the amount you can collect from your own retirement benefits or from your own dependents benefits based on your spouse’s work record. (As we mentioned above, if you file an early claim for retirement benefits—or spousal retirement benefits—Social Security will permanently reduce your benefits.)
But, your collecting early retirement benefits does reduce the eventual survivor's benefit that your spouse could collect based on your work record, if you die before your spouse.
Note well, though: Your claiming early retirement benefits doesn’t affect the amount of the survivor benefits you can collect based on your spouse’s work record, if your spouse dies before you. The amount of survivors benefit you will get is equal to the amount of benefits that your spouse was collecting when they died.
Some spouses claim early retirement or early spousal retirement benefits but can then switch to higher survivor benefits when their spouse dies.
Claiming your early retirement or spousal retirement benefits doesn’t affect the amount of your survivor benefits (which are based on your spouse’s record). So if you have a considerably older spouse who has a higher earnings record, or your higher-earning spouse is in poor health, you could claim your early retirement or spousal retirement benefit, relying on the fact that you might be able to switch to full survivors benefits in the not-too-distant future.
Note that if your spouse claims early retirement benefits, however, your eventual survivors benefit will be reduced. The amount of the reduction depends on how early your spouse claims their retirement benefits. (And similarly, your claiming early retirement benefits will reduce your spouse’s or your child’s eventual survivors benefit based on your work record.)
This original version of this article was excerpted from Social Security, Medicare & Government Pensions, by Attorney Joseph Matthews (Nolo).
Updated January 19, 2024
]]>If you keep working at a high enough salary, you might increase your lifetime earnings average, thereby slightly increasing your retirement benefits for the years to come. But you also might get hit with Social Security's double early retirement penalty, depending on how much you earn. (Scroll to the end of the article to learn about Social Security's standard early retirement penalty for claiming benefits before full retirement age.)
Yes, you can work after you start collecting Social Security retirement benefits, no matter what your age. But, if you claim early retirement benefits at age 62 (or 63, 64, 65, or 66) and continue to work, be aware that the money you earn over a certain amount each year will reduce your Social Security retirement benefits (until you reach full retirement age).
The reduction in benefits applies only to the years you're working. Your earnings don't permanently lower the amount of benefits you’ll receive in future years (and you can even make back some of the reduction in future years—more on this below).
So you can earn any amount at age 62, but it might cause a reduction in your benefits.
How much you can earn when you retire depends on your age. Social Security has different rules for:
Until you reach full retirement age, the Social Security Administration (SSA) will subtract money from your retirement check if you exceed a certain amount of earned income for the year. This penalty limits the amount you can earn when you retire and still have it be worthwhile to work.
For the year 2024, the maximum income you can earn after retirement is $22,320 ($1,860 per month) without having your benefits reduced. The amount that's exempt goes up each year. (88 F.R. 7803.) The maximum income limit (what Social Security calls the "retirement earnings test") doesn't change depending on your age; in other words, it's the same whether you're 62, 63, 64, or 65.
If you're collecting Social Security retirement benefits before full retirement age and you make more than this amount, Social Security will reduce your monthly benefits by $1 for every $2 you earn over the limit. Once you reach full retirement age, you can make any amount of money and still receive your full Social Security retirement benefit.
If you're already receiving your retirement benefits, a special higher earnings limit applies in the calendar year you turn your full retirement age (67 for people born in 1960 or later).
If you'll reach full retirement age in 2024, you can earn up to $4,960 per month without losing any of your benefits, up until the month you turn 67. But for every $3 you earn over that amount in any month before you turn 67, you'll lose $1 in Social Security benefits.
Beginning in the month you reach full retirement age, you become eligible to earn any amount without penalty.
If you're self-employed, you can receive full benefits if, during the year you turn your full retirement age, there are any months in which you didn't perform what Social Security considers “substantial services.”
The usual test for whether you worked substantial services is whether you worked in your business more than 45 hours during the month (or between 15 and 45 hours in a highly skilled occupation). In other words, if you work in your business more than 45 hours in a month before you reach full retirement age, Social Security could reduce your benefit. (Read more about what Social Security considers substantial services for the self-employed.)
The SSA bases its retirement benefit calculations on earnings reported on W-2 forms and on self-employment tax payments.
But Social Security may request earnings estimates from some recipients, especially recipients of retirement benefits whp have substantial self-employment income or those whose reported earnings have varied widely from month to month, including people who work on commission.
Toward the end of each year, Social Security sends these people a form asking for an earnings estimate for the following year. The agency uses the information to calculate benefits for the first months of the following year. The SSA will then adjust the amounts, if necessary, after it receives actual W-2 or self-employment tax information in the current year.
Social Security doesn't count pension payments, money made through investments, interest earned on bank accounts, or government benefits as earnings. (20 C.F.R. § 416.1110.)
Once retirees reach full retirement age, Social Security will no longer check their income. Because there's no Social Security limit on how much a person can earn after reaching full retirement age, there's nothing to report.
The amounts of early retirement benefits you lose as a setoff against your earnings due to work aren't necessarily gone forever. When you reach full retirement age, Social Security will recalculate your benefits to make up for the reduction.
Using a complicated calculation, the agency will actually adjust upward the amount of your benefits to take into account the amounts you lost because of the earned income rule. The lost amounts will be made up gradually, a little bit each year. It can take up to 15 years to completely recoup your lost benefits.
The calculations are complicated, but, to increase your monthly benefit, Social Security actually reverses part of the reduction it made when you claimed early retirement benefits. (Note that this reversal doesn't apply if you worked while collecting early spousal or survivors benefits because you were caring for a minor or disabled child.)
If you claim Social Security retirement benefits before your full retirement age, which is 67 for those born in 1960 or later, the SSA will permanently lower your benefits. Social Security does this to try to make the amount you receive over your life expectancy equal whether you claim at age 62 and get a reduced amount, at age 67 and get the standard amount, or at age 70 and get an increased amount.
The SSA will reduce your benefits by 5/9 of one percent per month for each month you receive benefits before your normal retirement age. This reduction is roughly equal to roughly .556% per month. For example, if you start claiming benefits 27 months before you turn 67, your monthly benefit will be reduced by 15% (27 x .556%). The reduction is permanent.
If you claim retirement benefits more than 36 months early, the per-month reduction is not quite as harsh. The SSA has a different calculation for the months over 36. For example, if you start claiming benefits at age 62, 60 months before you turn 67, your benefit will be reduced by 30% (36 x .556% plus 24 x .417%).
The earliest you can claim retirement benefits is 60 months before your retirement age.
To learn more about collecting Social Security benefits, you may want to consider reading Nolo's book, Social Security, Medicare, & Government Pensions: Get the Most Out of Your Retirement & Medical Benefits.
Updated January 19, 2024
]]>I’m turning 62 this year and I'm considering claiming my retirement benefits early, since I was just denied disability benefits. If I do, will this lower my wife’s benefits too?
As you know, claiming Social Security before your full retirement age, which is 67 for those born in 1960 or later, will lower your monthly benefit amount permanently.
Social Security reduces your benefits using the early retirement penalty so that you'll receive the same amount between now and the average life expectancy, whether you claim at age 67 and get the standard amount, age 62 and get a smaller amount, or 70 and get an increased amount.
That said, if you claim benefits early but you live past a certain age—called your “break-even point”—you'll wind up collecting less in total lifetime benefits than if you had waited to claim them at full retirement age.
Now, to answer your question: your claiming retirement benefits early will affect some types of benefits but not others.
If you claim your Social Security retirement benefits early, this won't affect your wife’s dependents benefits, which are also called spousal retirement benefits. As long as your wife waits until her full retirement age to claim her spousal benefits, she can collect the full amount. That's because your dependents' benefits are always based on your primary insurance amount, which is based on your earnings record at your full retirement age.
Whether or not you claim benefits early doesn’t affect the amount of dependents benefits your spouse can collect.
If your wife claims her spousal retirement benefit at age 62, or at any time before her full retirement age, her spousal benefits will be lowered permanently.
Spousal retirement benefits are half of your primary insurance amount—50% of what you would have received if you had waited until full retirement age to claim benefits.
Survivors benefits are handled differently. If you claim retirement benefits early, this will lower your wife’s survivors benefits (also called a “widow’s benefit” or “deceased husband’s benefit"), should you die before her. This is because, at your death, your wife will be able to collect the same amount you were entitled to before you died.
If your retirement benefit was lowered because of early retirement deductions, or increased because of delayed retirement (up until age 70), your wife’s survivors benefit will be similarly decreased or increased.
If your spouse were to collect a survivors benefit before reaching full retirement age for survivors benefits, their survivors’ benefit would be decreased. Surviving spouses can collect benefits starting at age 60, but collecting them before full retirement age for surviving spouses still counts as claiming benefits early and is subject to the early retirement reduction.
So if you collected retirement benefits early and then your wife collected her survivors benefits early, she would only get a small portion of what your full retirement age benefit would have been.
Full retirement age for survivors will eventually be the same as for workers, age 67, but for the next five years, it's not. It's slightly different. For example, someone who was born in 1960 currently has a full retirement age of 67 for their own benefits, but a full retirement age of 66 years and 8 months for survivors benefits.
Here is full retirement age chart for surviving spouses now in their 60s and younger. By 2029, the full retirement age will be 67 for both workers and surviving spouses.
Year of Birth |
Full Retirement Age for Survivors |
1957 |
66 and 2 months |
1958 |
66 and 4 months |
1959 |
66 and 6 months |
1960 |
66 and 8 months |
1961 |
66 and 10 months |
1962 and later |
67 |
Source: Social Security Chart for Survivors Benefits
There is an exception here if your spouse is caring for your dependent minor or disabled children after your death. In this situation, your wife would not get an early retirement penalty regardless of the age she claimed this “mother’s benefit.”
To find out more about benefit amounts and when it makes sense to claim them, see Nolo’s article on how couples can maximize their Social Security benefits.
Updated January 18, 2024
]]>First, some background: Until you reach full retirement age, Social Security will subtract money from your retirement check if you exceed a certain amount of earned income for the year. For the year 2024, this limit on earned income is $22,320.
(Note, however, that any reductions taken from your retirement benefits for working are paid back to you over a 10-15 year period after you reach full retirement age. For more information, read our article on the penalty for working and collecting early retirement.)
Social Security has a special rule for small business owners because some people with their own businesses try to get around the income limit by continuing to work and paying a relative instead of themselves, or by continuing to run the business but being paid only for reduced work time, just to stay under the limit.
The rule is that, if you're self-employed, you can receive full benefits for any month in which Social Security considers you retired. To be considered retired, you must not have earned over the income limit and you must not have performed what Social Security considers substantial services.
The usual test for substantial services is whether you worked in your business more than 45 hours during the month (subject to some exceptions). For instance, if you worked between 15 and 45 hours per month and the work you did could be considered highly skilled, your work could be considered substantial services (more on this below).
But if you worked less than 15 hours, in no case will you be considered to have performed substantial services (you're considered retired, period).
When considering when services are substantial, Social Security will look at the following factors:
As mentioned above, if you worked between 15 and 45 hours in a month and the work you did could be considered highly skilled, your work will likely be considered substantial services. But where a person works from 15 through 45 hours in a month and can establish that the services weren't substantial, the person can be considered retired.
Services can be considered not substantial if both of the following are true.
The actual earnings limit varies depending on whether you’ll reach full retirement in that year. You’ll be considered retired this year if either of the following is true.
Social Security might require some extra information from you to prove you're not earning too much income or performing substantial services. The agency will want to see evidence that you're really giving up full-time work and not merely shifting your pay to someone else.
Social Security is likely to ask for information regarding your continuing involvement with your own business if any of the following are true:
Social Security might ask for some personal and business financial documents including:
Try to contact your local Social Security office several months in advance of applying for early retirement benefits so that you’ll learn what documents Social Security wants and you'll have time to gather the documents.
If Social Security determines that you provide services to the business with a value that exceeds the amount you're paid—based on the time you spend, the level of your responsibility, and the value of services you provide—Social Security might attach a dollar value to those services. If this dollar value, plus what you're actually earning, exceeds the amount of earned income permitted for your age, your benefits may be reduced.
If you're receiving early retirement and you receive substantial self-employment income, or you have income that varies widely from month to month, Social Security will request earnings estimates from you.
Toward the end of each year, Social Security will send you a form asking for an earnings estimate for the following year. The information you submit will be used to calculate your retirement benefits for the first few months of the following year, until they're adjusted with your actual self-employment tax information.
Once you reach full retirement age, you'll no longer need to report your earnings, because there's no Social Security limit on how much a person can work or earn after reaching full retirement age.
This original version of this article was based on an excerpt from Social Security, Medicare & Government Pensions, by Joseph Matthews (Nolo).
Updated January 18, 2024
]]>Here's how to determine what your Social Security retirement benefits will be at different ages and whether you should take early retirement benefits or not.
You may opt to receive benefits early (at age 62), at full retirement age, or after full retirement age. Your full retirement age varies between 66 and 67 depending on when you were born. (To determine your full retirement age, visit the Social Security Administration's website and use the Retirement Age Calculator.)
Almost 40% of retirees claim benefits as soon as they turn 62 (referred to as "early retirement"). If you claim early retirement, you'll receive up to 25% less than you would have if you'd waited until full retirement age (this number goes up to 30% for people born in 1960 or later).
Although claiming at full retirement age entitles you to "full" retirement benefits, you're actually given an incentive to wait even longer, as described next.
From your full retirement age until you reach age 70, the Social Security Administration (SSA) will increase your benefits by 8% per year.
Let's see how this plays out. Imagine that you'd receive $21,180 annually if you retired at your full retirement age (let's say it's 66). If you retired early, at age 62, you'd receive only about $15,885 in Social Security annually from retirement until the end of your life. If you waited to retire until age 70, you'd receive about $28,000 annually, an 87% increase in monthly payments over claiming them at age 62.
Curious about the grand totals?
If you lived to be 75, you would receive a total of:
But if you lived to be 85, you would receive a total of:
Of course, these annual amounts will vary based on cost-of-living increases built into the payment system.
To find out how much your benefits will increase or decrease depending on the age you retire, visit Social Security's Early or Late Retirement Calculator. The SSA also offers online calculators to help you estimate your retirement benefits at each age.
You can also see a personalized comparison of retirement benefits at age 62, at full retirement age, and at age 70 on your Social Security Statement. Go to www.ssa.gov/mystatement to view your statement (you'll need to set up a Social Security account).
Social Security no longer sends out printed statements to everyone; the agency only sends paper statements to those over 60 who don't have a Social Security account.
Should you take the money and run at age 62? Or hold out until you're 70? About 40% of people don't wait past age 62, usually because they need the money, are convinced that Social Security might collapse at a later date, or are fearful of a short life span.
But is early retirement a good option for you? The questions below will help you decide.
Some people, especially construction workers, movers, and other physical laborers, are less physically able to handle work at 62, even though they don't qualify for disability benefits. They may be good candidates for early retirement. But if you're still able-bodied and interested in working, you might want to avoid claiming early retirement benefits. If you're earning a high salary when you stop working, you'll miss the opportunity to boost your Social Security payment amount. (Your monthly payments are fixed based on the average of your top 35 earning years. Once you elect to receive benefits, your average stops increasing based on later Social Security contributions.)
Second, if you work while receiving benefits, you'll lose one dollar in benefits for every two dollars you earn over the SSA's earnings limit ($21,240 in 2023). There are no such deductions if you work after reaching full retirement age. The SSA provides an online earnings test calculator to determine whether working will lower your retirement benefits.
If you're convinced—either by genetics, research, or the amount of time you spend in doctors' offices—that you'll have a shorter lifespan than your peers, it doesn't make much sense to delay your retirement benefits.
If you had a good idea of when you were to die, you could compare your total benefit payments under all three common scenarios:
Financial planners prefer to calculate your break-even point—that's the age at which two of your total lifetime benefit amounts become equal to each other. (Social Security claims that if you live until your average life expectancy, your total lifetime benefit should be roughly the same whether you choose to retire at age 62, 66, or 70.)
Your personal break-even point will depend on a combination of factors, including your earnings record and when you were born. If you believe you'll live past this age (referred to as the "break-even" age), you should consider delaying claiming benefits until the later of the two dates, in order to give yourself an overall higher total.
To get specific information about your personal break-even point, you can call Social Security at 800-772-1213 and ask them to do the calculations for you.
Social Security has reduced a number of strategies that couples used to get higher lifetime benefits for one or both spouses. But carefully choosing when to claim benefits can make a difference in monthly payments and in one spouse's survivors benefits.
If one spouse has contributed far less to Social Security than the other, for example, the greater-contributing spouse should ideally wait longer to claim benefits—at least until full retirement age. Then if the higher-earning spouse dies first, the survivor can claim the spouse's full benefit.
And since, statistically, men die first, for some couples, it makes sense for the husband (or for a spouse with health problems), to wait to collect, while the other spouse begins collecting at age 62. When the first spouse dies, the widow can collect survivors benefits based on the higher benefit.
Read more at Nolo's article on how spouses can maximize their retirement benefits.
Keep this in mind: Your family's survivors benefits, which they can collect after your death, will be reduced if you claim early retirement benefits. But your family's spousal or dependent benefits, which they can collect while you're still living, won't be decreased if you claim early retirement benefits.
Claiming early benefits makes sense if you need the money for necessities—though that's also a sign that you're not saving enough and should continue working longer, if you're physically able to.
But claiming early benefits simply to augment an already-comfortable annual income doesn't make much sense. If you planned to invest the money, your investments would need to earn more than 7% annually to equal what you'd make by delaying benefits until full retirement age. If you can, withdraw money from tax-advantaged retirement accounts before starting to collect Social Security benefits.
Updated January 31, 2023
]]>An insurance policy or annuity is a contract between the company that sold it and the person who bought it. As a result, the proceeds don't go through the probate process (see How the Probate Process Works: Information for Executors), and the executor isn't in charge of them. It's common for the policy beneficiary, not the executor, to deal with the insurance company and collect the benefits directly. But executors may be called upon to help beneficiaries claim the payments they're entitled to.
Proceeds from life insurance policies can provide quick and welcome income for surviving family members after a death. The beneficiary will probably want to get the claim process started as soon as possible. You'll want to find out the answers to the following questions:
To claim life insurance benefits, the beneficiary should contact the insurance company's local agent or check the company's website. Some companies ask beneficiaries to start by sending in a form that merely reports the death; they then send the beneficiary a packet of forms and instructions explaining how to proceed. Generally, a beneficiary can apply for the proceeds simply by filling out the insurance company's claim form and submitting it to the company along with a certified copy of the death certificate.
If more than one adult beneficiary was named, each should submit a claim form. If the primary beneficiary died before the policyholder did, then the alternate (contingent) beneficiary can claim the proceeds. An alternate will need to submit the death certificate of the primary beneficiary in addition to the death certificate of the policyholder.
How long it takes to process an insurance claim can vary; a typical range is a several days to several weeks after you submit the claim.
Annuities, like life insurance policies, are contracts with insurance companies. Usually, annuities provide retirement income to the policy owner, but under certain circumstances they can result in payments to a beneficiary. Unlike most other nonretirement plan investments, the earnings on annuities are not taxed until they are distributed. As with life insurance policies, you'll want to find out some basic information on annuities:
To claim annuity benefits after the policy owner dies, the beneficiary should request a claim form from the insurance company that issued the annuity. The beneficiary will need to submit a certified copy of the death certificate with the claim form.
The Social Security death benefit is relatively easy for surviving family members to claim and quick to be paid, but it is currently a small lump-sum payment of $255 (assuming the deceased person had enough Social Security work credits). The surviving spouse or dependent children can claim this benefit. This payment is in addition to ongoing survivors benefits to which the spouse or children may be entitled.
Go to the local Social Security office to claim benefits. The staff can help with the paperwork and explain what information and documents—a certified copy of the death certificate, for example—are needed. To find the closest office, check the government listings in the phone book, use the "How to Find Your Local Office" service at www.ssa.gov, or call the SSA, toll-free, at 800-772-1213.
Family members may also be entitled to monthly survivors benefits. You don't have to be of retirement age to receive benefits: dependent children, surviving spouses, and even some ex-spouses may be eligible for survivors benefits. The more quickly family members apply for these benefits, the better, because some of them are not retroactive.
Applicants can start the application process over the telephone (800-772-1213) or online at www.ssa.gov, which may speed things up, but they won't be able to complete the process without a face-to-face meeting with a staffer at an SSA office. Generally speaking, the following family members may be entitled to monthly survivors benefits.
Surviving spouses. A surviving spouse who is already receiving Social Security benefits based on the deceased person's earnings just needs to report the death to the SSA at 800-772-1213. The SSA will change monthly benefits to survivors benefits. If the spouse is already getting benefits, the SSA will check to see whether or not the survivors benefit would be higher. The spouse will receive the higher amount.
A surviving spouse who is not already getting benefits or is receiving benefits based on his or her own earnings record will need to apply for survivors benefits. Eligibility for survivors benefits will depend on the survivor's age and family circumstances. Benefits are given to any surviving spouse who:
Former spouses. Generally, divorced spouses are eligible for benefits under the same rules as surviving spouses, if the marriage lasted at least ten years and the divorced spouse does not remarry before age 60. If, however, the ex-spouse is taking care of the deceased person's young or disabled children, it doesn't matter how long the marriage lasted.
Unmarried children. Dependent children of the deceased person are eligible for benefits if either of the following apply:
If children are already receiving benefits, the SSA will change the benefits to survivors benefits after the family notifies the SSA of the death.
Dependent parents. Parents who depended on the deceased worker for at least half of their support and who are at least 62 years old are also eligible for benefits.
Nolo offers several resources to help you pursue next steps. If you are looking for more information on survivors benefits, check out the book Social Security, Medicare & Government Pensions, by Joseph Matthews (Nolo). For more information on claiming insurance and Social Security benefits—and everything else you need to know about settling an estate—get The Executor's Guide: Settling A Loved One's Estate or Trust, by Mary Randolph (Nolo).
If your situation isn't very straightforward, consider getting help from an experienced estate planning lawyer in your area.
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