Do You Really Care About Your Wife? (Social Security Survivor Benefits Suggest Otherwise)
An important study from the Boston College Center for Retirement Research has found that husbands ignore (maybe overlook or under think) their wife’s retirement income needs when making decisions about when to start Social Security benefits. Widows (and widowers) are entitled to switch to Social Security Survivor benefits and receive their spouse’s full benefit amount upon death.
This switch can increase their financial well being and your household’s lifetime wealth.
While most husbands certainly care about their wives, many make decisions about Social Security that negatively impact their spouse in the long run.
What is the Problem? Why Are Social Security Researchers Concerned About Your Claiming Decisions?
There are a few trends, that may or may not apply to you. However, if you are in a typical marriage where the husband earns more than the wife and the husband dies earlier, then you are probably starting Social Security too early for the financial well being of your wife.
According to the research, in most marriages, the husband:
- Earns more than the wife (Still true for about 75% of all marriages)
- Is more likely to die before the wife (The Harvard Health blog reports that, “On average, women live longer than men. In fact, 57% of all those ages 65 and older are female. By age 85, 67% are women. The average lifespan for women is about 5 years longer than for men in the U.S., and about 7 years longer worldwide.”)
- Starts Social Security before their full retirement age. (Most workers claim Social Security as soon as they are eligible at age 62, reporting that they need the liquidity and that they want to retire while still healthy enough to enjoy leisure time.)
The impact of these trends is often significant to the income needs of the surviving wife.
You see, the surviving spouse has the ability to switch to a higher benefit when widowed. If the lower earner (usually the wife) lives longer, he or she will be entitled to switch from their own benefit and start claiming the deceased’s maximum benefit. So, if you are the higher earner, your benefit amount impacts your lifetime as well as that of your spouse!
How Much Are Widows Impacted by Reduced Social Security Survivor Benefits?
The average widow’s total income drops 35 – 40 percent when a husband passes away. And, the earlier the husband had started his benefits, the larger the drop in the widow’s income after the couple’s second Social Security check stops coming in.
Research cited in the Boston College study also found that:
- Minority households fare worse than their white counterparts
- Married women whose households are most reliant on Social Security income are the most vulnerable to poverty in widowhood
- Widows are 6.2 percentage points less likely to fall into poverty if their husbands delay claiming from 62 to 63, and the effect is stronger for widows most reliant on Social Security.
And, get this:
- Each year a husband delays could raise his widow’s benefit by about 7.3 percent.
What Are Married Men Supposed to Do?
It appears that many men do consider how to maximize their benefits over their own lifetimes. However, for whatever reason, they do not consider getting the most out of Social Security for both themselves AND their wife.
DO THIS TO MAXIMIZE YOUR PAYOUT: So, if you want to try to get as much money as possible out of Social Security (again, for you and your wife, not just you), then you probably want to do the following:
- The highest earner in the couple should defer the start of benefits as long as possible up until the maximum retirement age of 70. Don’t focus on who is older. Or, who retires first. The key is to make sure the highest earner grabs the highest possible payout.
When you choose to start the higher earner’s Social Security benefits has major financial implications for a long time into the future — for both you and your spouse.
Maximizing the higher earner’s benefit usually results in the highest total household lifetime payout of Social Security benefits. When calculating your Social Security, you don’t necessarily want to focus on the monthly paycheck. You want to look at the lifetime value of all of those paychecks added up together — for as long as both you AND your wife are expected to live.
The NewRetirement Planner allows you to do this. You can see the lifetime value of Social Security in the PlannerPlus Inspector function. Try different start ages and benefit amounts and compare the results!
Why Are Married Men Leaving Money on the Table?
Potential explanations for why people collect Social Security early and reduce their lifetime benefit may include:
- Their feelings about work, existing health issues, and whether they will get a defined benefit pension from an employer.
- An interest in retiring as early as possible and wanting to start Social Security benefits to help make this happen,
- A lack of knowledge about Social Security survivor benefits.
- Husbands simply don’t think that they will die earlier, even if they know that to be a statistical reality.
- Feeling like they had better start collecting now, because the future is uncertain.
See other ways retirees leave money on the table…
What Would Convince You to Delay Benefits to Leave Your Wife More Comfortable?
In the Boston College experiment, the researchers displayed Social Security’s benefit information to the men in three different ways.
- In the first format, a control group saw the basic information: the husband’s full retirement benefit, and then a link to a second page displaying his benefits for various claiming ages.
- A second format also displayed his full benefit, but the link went to a page with estimates of his widow’s survivor benefits, based on the husband’s various claiming ages – the later he files, the more she would receive.
- The third format had the same information as the second format, but it was presented on a single web page.
No matter how the information was presented, the men were not persuaded to postpone their own benefits to benefit their widow.
Let’s find out what works! We would really love your input. Take the 30 second survey now!
And, don’t forget to create a detailed retirement plan and try out different scenarios for Social Security and more! No matter what you have done or not done in the past, the NewRetirement Planner makes it easy to get on track now!