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Losing part of your social security when a spouse dies
Old 05-07-2011, 10:53 AM   #1
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Losing part of your social security when a spouse dies

I never hear it mentioned when planning for retirement income, if people plan on having to live on one social security check (which ever is higher) if one spouse dies unexpectedly. When your $50 or $60,000 income is suddenly cut to $30 or $40,000, are you prepared for that?
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Old 05-07-2011, 11:02 AM   #2
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I suppose it is in everyone's plan whether they know it or not. Another scenario is a premature death (in early retirement) and one SS is out of the picture all together.


Those scenarios are in our plan.

Our plan includes Pension, SS(x2 hopefully), and SPIA we will buy plus a portfolio.
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Old 05-07-2011, 11:03 AM   #3
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I planned for it. My projections include reductions in both SS and pension. OTOH, income from investments continues at 100% of its prior level.

I'm also projecting spending reductions. Roughly speaking, the cost of the house (taxes, insurance, maint, repairs, and utilities) would continue at 100%. Almost everything else is cut in half.

When I net it all together, neither of us is particularly better or worse off after the first death. But other people could have dramatically different results.
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Old 05-07-2011, 11:03 AM   #4
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I never hear it mentioned when planning for retirement income, if people plan on having to live on one social security check (which ever is higher) if one spouse dies unexpectedly. When your $50 or $60,000 income is suddenly cut to $30 or $40,000, are you prepared for that?
And don't forget that you also get kicked from MFJ to single filing status. In my mom's case, when my dad passed the higher taxes (on less income) was almost more of an impact than the loss of her SS check (she inherited his higher benefit when he died, but lost her own). Not only are the brackets much lower for single filers, but the threshold for SS being 85% taxable is much lower as well (and should be indexed for inflation but isn't, but that's a rant for another time).
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Old 05-07-2011, 11:06 AM   #5
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Also, the survivor's overall (household) spending should be reduced by a certain % because the deceased is not consuming...

Our goal is to not have that type of event force the survivor to compromise their lifestyle (financially).
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Old 05-07-2011, 11:08 AM   #6
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My spreadsheet covers all eventualities.
Since DW and I each have pensions without survivor benefits, that's another wrinkle to consider, as are RMDs, etc.
I set it up with lots of columns that consider the premature death of either of us. For any given year in the future, I can predict what our SWR should be, so I'm pretty confident this is covered.
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Old 05-07-2011, 11:16 AM   #7
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I haven't been too fancy with figuring the whole thing. I just use half of our projected SS in my calculations.
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Old 05-07-2011, 11:34 AM   #8
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Being divorced, my ex-wife is already dead in my retirement plan. Also, I'm not including SS as part of my early retirement equation since I have no controlled of the matter. I like to be in controlled of my own finances. When I receive a SS checks, it would be icing on the cake.
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Old 05-07-2011, 11:53 AM   #9
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If you ER early enough then Social Security just might not have enough impact to matter... especially (as others have noted) after the reduction in living expenses & taxes.

I'd rather be worth more alive than dead. But after I'm gone the surf-wax budget is going to go to zero.
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Old 05-07-2011, 12:32 PM   #10
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I spent more time working on my husband's welfare if something should happen to me than I did on our joint retirement. His pension is way smaller and not cola-ed. His SS is way smaller; he took it at 62. He can collect only one-half of my pension as a widow. So, once I realized he had a problem, I put every cent I could into savings. I am not collecting early SS but am on a ten-year TIAA payout of funds from a job I had for 3-years in the 80s. His mother just turned 94; his uncle died 2 years ago at 96; his grandmother lived to 96. None of my family made it to 75. The long life expectancy made cola-ed SS better for him than the TIAA-Cref (small percent of our investments). A side benefit was a reduction in RMD amounts.

Low and behold, my current projections show that if I were to die the day he turns 66, his widow income will be slightly higher than our joint income is without touching any of the investments. Mission accomplished (if our luck holds). He would pick up my SS, continue TIAA payouts until he is 74, and collect his and half of my pension. By then he would find himself in a flood of RMD payouts and taxes.
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Old 05-07-2011, 02:13 PM   #11
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Now there you go making me add to my speadsheet calculations did not plan on dieing ever and the plan was ok with that now there is this big bus theory

You would also have to take into consideration a lump sum life insurance payment upon the death; this may add more than the SS would have paid out in some cases.
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Old 05-07-2011, 03:03 PM   #12
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And don't forget that you also get kicked from MFJ to single filing status. In my mom's case, when my dad passed the higher taxes (on less income) was almost more of an impact than the loss of her SS check (she inherited his higher benefit when he died, but lost her own). Not only are the brackets much lower for single filers, but the threshold for SS being 85% taxable is much lower as well (and should be indexed for inflation but isn't, but that's a rant for another time).
Yep, this is the real "killer". It also makes it relatively easy for the surviving spouse to exceed the Medicare means-test threshold for parts B and D.
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Old 05-07-2011, 03:16 PM   #13
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I'm prepared, but maybe the SS system will need to be adjusted to reflect this impact on two income families.
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Old 05-07-2011, 04:38 PM   #14
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I'm prepared, but maybe the SS system will need to be adjusted to reflect this impact on two income families.
I'm sure their working on ways to give us more money as we speak.
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Old 05-07-2011, 05:11 PM   #15
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I'm sure their working on ways to give us more money as we speak.
Yeah, well, I was thinking more of something like what my and my wife's state pension system does. When we retired, we got to choose among several alternative survivor benefits, one of which was was a full survivor benefit, and that's what we both chose. Then the pension benefit is reduced for each of us while we are both alive, but household income is not reduced when one dies. I assume the benefit reduction is calculated so the pension fund comes out even. I don't see why SS shouldn't offer similar options -- wouldn't cost any more.
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Old 05-07-2011, 06:35 PM   #16
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I'm prepared, in that I plan to remain single. So, my social security check will not be affected by anyone's death.
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Old 05-07-2011, 06:54 PM   #17
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For those retiring early SS has less of an impact, especially if someone retires 20+ years before 66 (the $10-14k/year I expect to get doesn't change my retirement date even by a month, because it would be 30 years away). That said, most people are not in that boat, like my parents.

I definitely factored in the possible scenario of them losing $25K/year if one of them died. Since they do not expect all of their income to come from SS, it only has a minor impact if one of them die in the very early years of collecting SS, between 66 and 75.
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Old 05-07-2011, 07:57 PM   #18
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If your spouse is of the same sex the surviving spouse gets nothing from social security.

This can be particularly devasting if the deceased spouse's benefits were much higher or if the surviving spouse doesn't even qualify for benefits on their own.

It effects thousands of people every year.
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Old 05-07-2011, 10:09 PM   #19
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My wife passed away about 8 years ago and now I am 59 and am eligible to start collecting widow benefits as early as age 60 as long as I do not remarry before that time. These are benefits based on her earning record which I can collect until I start collecting my own benefits. My son has been collecting widow benefits as a child of a deceased since he was 10. They end now that he turns 18.
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Old 05-07-2011, 10:43 PM   #20
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My wife passed away about 8 years ago and now I am 59 and am eligible to start collecting widow benefits as early as age 60 as long as I do not remarry before that time. These are benefits based on her earning record which I can collect until I start collecting my own benefits. My son has been collecting widow benefits as a child of a deceased since he was 10. They end now that he turns 18.
My brother is divorced, his former wife quite a bit younger than he but she has had substantial earnings. Does anyone know if she must be 62 before he can receive SS based on her her earnings?
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