Dear Rusty: My husband is taking retirement next year and we went through the application process yesterday. No surprises until we found out that his delayed benefits do not apply to spousal benefits. His whole purpose of delaying retirement was to maximize benefits for me in case of an unexpected death. I have been reading and preparing for this retirement for several years, and I have never come across this information. I personally would like to have known this before now. If it has been covered in your column, I missed it. Anyway, I have found your column most informative. Thank you. — Upset Spouse
Dear Upset Spouse: It’s true that the question of delayed retirement credits and whether they apply to spousal benefits and/or survivor’s benefits is widely misunderstood. Delayed retirement credits, or “DRCs,” are accumulated when one delays claiming Social Security retirement benefits until after their full retirement age. DRCs are earned at the rate of two-thirds of 1 percent for each full month of delay or 8 percent per year of delay. At age 70, that can mean a benefit amount as much as 32 percent higher if your full retirement age is 66. DRCs don’t accumulate after age 70.
The confusion for many comes from believing that the living spouse of the person delaying will be entitled to a spousal benefit based upon the amount increased by DRCs, which is not true. Benefits for a living spouse are based upon the other spouse’s full retirement age benefit, not the increased benefit earned by delaying past full retirement age.
Simplified, if you have reached your full retirement age when you claim your benefit as a living spouse, you will get 50 percent of your husband’s “primary insurance amount,” which is the amount he was due at his full retirement age, not his DRC-increased benefit amount at age 70.
Survivor’s benefits, on the other hand, are based upon the DRC-increased benefit amount, so if your goal is, as stated, “to maximize benefits in case of an unexpected death,” then you and your husband have achieved that goal. If your husband should predecease you and you have reached your full retirement age, you will get 100 percent of the increased benefit your husband achieved by waiting until he was 70 to apply (including all DRCs).
If you claim the survivor’s benefit before you reach your full retirement age, that benefit will be actuarially reduced based upon the number of months earlier that you claim it, but you also have the option to delay claiming your widow’s benefit until you reach your full retirement age (FRA) and get the full 100 percent of your deceased husband’s benefit at his death.
And, incidentally, your FRA as a widow may be a little less than your normal FRA. Please note, too, that the survivor’s benefit doesn’t grow beyond your full retirement age, so make sure you do not wait beyond your FRA to claim it.