Social Security Matters: are you prepared to maximize your benefits?

By Special to the AFRO
By Russell Gloor 
AMAC and AMAC Foundation

As summer begins, the second quarter of 2023 is quickly coming to a close. This week, the AFRO would like to highlight issues related to senior citizens and social security. In this AFRO Senior Guide, learn how to maximize your benefits as a working widow (or widower). 

Ask Rusty: working widow seeks to maximize Social Security benefits

Dear Rusty: I was widowed years ago and, when I approached age 60, I looked into Social Security survivor benefits based on my late husband’s record. He started receiving Social Security shortly before he died at $1,200 per month. My income at age 60 was $42,000 and, since Social Security would keep $1 for every $2 above the limit (around $15,000 at that time), I did not apply. Next year I will reach my full retirement age of 66.5 years, but I plan to work until I am 70. Will I be able to receive full survivor benefits next year if I continue to work? I plan to switch to my own Social Security benefit at age 70, which will be higher than my husband received. Since I am waiting to apply for survivor benefits, will there be an increase in the amount I receive? I am a municipal employee and when I retire, I will collect from the state retirement system. I paid into the state retirement system and also paid Social Security taxes, so will my state pension have any impact on my Social Security?

Signed: Still Working

Dear Still Working: Congratulations on having an excellent strategy for maximizing your survivor benefit as well as your personal SS retirement benefit. Once you reach your full retirement age (FRA) next year, you are no longer subject to Social Security’s “earnings test” and can collect Social Security benefits without those benefits being affected by your work earnings.

Your surviving spouse benefit will be more because you are waiting until your full retirement age to claim it. At your FRA you can claim your full survivor benefit from your deceased husband (without reduction) and collect only that while still allowing your personal SS retirement benefit to grow to maximum when you are 70. Then, at age 70, you can switch from your smaller survivor benefit to your maximum SS retirement benefit and collect that higher amount for the rest of your life. Essentially, your survivor benefit reaches maximum at your FRA and your personal SS retirement benefit reaches maximum at age 70.

Note that you should apply for your benefits a couple of months before you wish them to start. For example, if you reach your FRA in May of next year you can apply for your survivor benefit in February or March, specifying that you wish your survivor benefit to begin in May 2024 at your full retirement age. Just be sure to emphasize that you are applying only for your survivor benefit and wish your personal SS retirement benefit to continue to grow by earning Delayed Retirement Credits (DRCs) until you are 70. 

You cannot apply for your survivor benefit online, so you will need to call Social Security, at either the national number (1.800.772.1213) or your local Social Security office, to make an appointment to apply for your benefit as your husband’s widow.

And to answer your last question, your state pension won’t affect your monthly Social Security payments because you paid Social Security FICA payroll taxes from your municipal earnings. 

Ask Rusty: what if I delay but die before claiming social security? 

Dear Rusty: Hypothetically, if I plan to sign up for Social Security at 70 and pass away before that, I will get nothing. My spouse would still get a boost in the amount she receives because I made more, but everything I put into the program vanishes. I haven’t reached my full retirement age yet and I still have income, but if I sign up now at 63 my benefits will be withheld due to my income. Then at full retirement age (presuming I elected to claim earlier) a re-calculation will take place and my monthly amount would be adjusted. Well, what happens if I decide to wait until 70 but pass away before I claim? Are my contributions repaid in a lump sum, or will I (or someone else) still lose everything? 

– Signed, Uncertain About My Future

Dear Uncertain: You are correct that if you pass away before collecting your earned Social Security benefits you won’t personally get anything. Social Security has, since inception, been a “pay as you go” program where those currently working and contributing to Social Security pay benefits for those currently receiving Social Security. That means that if you die before collecting, the monies you contributed will have already been used to pay other recipients, but the contributions you made may still entitle your dependents to benefits on your record. 

For those who are in their early 60s, average longevity is mid-80s, meaning your spouse would likely collect benefits on your record for more than two decades, any minor children could collect until they are adults, and any permanently disabled child you may have would get benefits from your record for the rest of their life as well.  

The Social Security payroll taxes you contributed were not put into a private account in your name. And, on average, it is to the beneficiary’s advantage the program doesn’t work that way because that personal account would be depleted fairly quickly after you claim – rather than getting benefits for the rest of your life, you’d only get benefits (plus interest) from your personal account, which would run dry pretty fast. FYI, we have researched this very carefully and found that, on average, all payroll taxes contributed to Social Security by an individual will be recovered within about 5 years of starting benefits. 

The actual length of time to recoup one’s contributions varies somewhat depending on lifetime earnings and contributions made, but lower earning beneficiaries will recover everything contributed through payroll taxes within about three years, while it could take as much as five years for higher earners to get back everything they’ve paid into the program. And for clarity, since self-employed individuals pay both the employee and employer portion of the payroll tax, it does take longer for those who own their own business to recoup what they’ve contributed. Nevertheless, on average, most who claim benefits will get considerably more from the program than they paid in Social Security payroll taxes.

As to your specific question, if you die before collecting, the contributions you made weren’t deposited in a personal account for you and won’t be paid out in a lump sum. Rather, the payroll taxes you paid while working were used to pay benefits to beneficiaries receiving at the time, and those working and contributing after you die will fund the benefits paid to your spouse or disabled adult child until they die, or to your minor children until they are adults. The Social Security benefits you earned aren’t just for you – your eligible dependents will also benefit from your record. 

Russell Gloor is the national Social Security advisor at the AMAC Foundation, the non-profit arm of the Association of Mature American Citizens. 

This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the original publishers, the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). 

NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, email ssadvisor@amacfoundation.org.