December 15, 2015

For Widows, Social Security System Can Provide Rude Shocks

WITHIN weeks after her 78-year-old husband, James, died last year, Jo Etta Brown, 75, came face to face with the financial realities of being a widow living on Social Security.

After gathering her husband’s death certificate and their marriage certificate, she drove from her home in Gardnerville, Nev., to the closest Social Security office, about 45 minutes away in Reno.

“It was a shock when my husband died,” said Mrs. Brown, who thought she had a pretty good understanding of the system after three decades working in the savings and loan industry and then volunteering in retirement at a group that supports shoring up Social Security, Medicare and Medicaid. “But after they applied the Social Security formula, which is rather complicated, to my situation, the next shock was learning that the benefits would be cut 25 percent.”

With the drop in income, she has cut back on her food and travel budgets and is even weighing selling her home.

Despite the peace of mind its name promises, Social Security can be a source of confusion and stress — and an added burden to those dealing with the loss of a spouse. Benefit choices that seemed sensible, even necessary, for a couple preparing for retirement can prove to be a handicap after one spouse dies.

What a widow or widower claims from Social Security, and when, can make a long-term difference in their lifetime benefits. Widows are entitled to the benefits they have earned based on their own work history, as well as survivor benefits, based on their deceased spouse’s work history — but they cannot collect both at the same time.

In many cases, financial planners advise, the best strategy may be to take the smaller benefit — whether it is the retirement benefit or the widow’s benefit — while letting the other one grow, and switching to it later.

Even so, there is no simple, universal road map for maximizing benefits because of the complexity of Social Security rules and the variations in individual circumstances, including age and work history.

The Browns, for example, retired to Gardnerville, a ranching and farming community, in 1996, equipped with savings, pensions and Social Security for comfortable retirement years. But their accounts were hit hard in the market’s downturn from 2007 to 2009. When her husband died, Mrs. Brown had not anticipated how little she would have to live on from Social Security.

She did not disclose the amount of her check, but according to Social Security Administration figures, the average widow receives about $1,280 a month.

Even though the amount is not large, it is an indispensable source of income for most widows. Without Social Security, said Debra B. Whitman, AARP’s chief policy officer, “data show that at age 85, some 46 percent of widows would be living in poverty.”

One reason Social Security can be so complicated for women is that laws setting up the program were devised in the 1930s, when the system was based on the employment histories of retired men — since far fewer women worked — and life expectancy was shorter for both men and women.

By 1950, only 314,000 widows (63 widowers) were on the Social Security rolls receiving survivor benefits. Over the years, the number of recipients has soared. Last year, the number of widows and widowers taking such benefits reached four million (fewer than 91,000 are widowers), according to Social Security figures.

More women depend on that government check because they have fewer other sources of retirement income. Women often do not have pensions because they have worked in noncompany settings or have not had continuous employment. And even if a woman does receive a company pension, it tends to be smaller than men’s.

Women account for 56 percent of Social Security beneficiaries who are 62 or older, and 66 percent of those who are 85 and older. And they typically need benefits longer: Women reaching age 65 this year are expected to live, on average, an additional 21.6 years, according to the Social Security Administration; men are expected to live 19.3 more years.

Last year, $706.8 billion in benefits was paid to 48 million retirement and survivor beneficiaries, many of them women.

“Many women are not aware that they may be entitled to a survivor’s benefit, which could make a difference in the amount they have to live on,” said Jean Kahl, an independent adviser with the financial services provider Raymond James in Gaithersburg, Md. But figuring it out, Ms. Kahl said, is not easy. “There is absolutely no one formula to follow because everyone’s age, working history and spouse details differ,” she said.

To collect a survivor’s benefit, in most cases, the marriage must have lasted at least nine months, and the benefits may not begin until the widow is age 60.

Disabled survivors can file earlier, at age 50. But most early widows, like Tia Murphy, 61, of Bethel, Conn., have a long wait for survivor’s benefits. She was widowed 13 years ago when her husband committed suicide, but, at 48, she was too young to claim benefits.

When she began receiving survivor’s benefits a year ago based on her husband’s earnings history, “it wasn’t a huge amount,” she said, “but it freed me to up to take a lower-paying job after I was laid off from a start-up.”

She plans to claim her own benefit, which will be higher because she had a career in the telecommunications industry, when she reaches age 70. If she waits, her retirement benefit will accrue delayed-retirement credits, which will increase the amount of her monthly Social Security check.

And women who are divorced, as long as they were married at least 10 years and meet certain other criteria, also may receive survivor’s benefits.

Critics of Social Security’s complexity, like Laurence J. Kotlikoff, an economics professor at Boston University, argue that it is unfair that survivor’s benefits are determined by a deceased spouse’s (or ex-spouse’s) “decision on how long to work and when to claim his own Social Security benefits.”

Professor Kotlikoff, co-author of “Get What’s Yours: The Secrets to Maxing Out Your Social Security” (Simon & Schuster, 2015), maintains that Social Security is “incredibly outdated, sexist and unfair across and within generations,” adding, “Widows can pay into the system over decades, yet get not a penny based on all the money they paid in Social Security taxes.”

John F. McAdams, a claims authorizer for Social Security in Philadelphia, says an undetermined number of widows are losing thousands of dollars over the long term. Sometimes, he says, widows mistakenly file for both their own benefits and their survivor’s benefits on the same date. Even though they can draw only one at a time, the filing misstep prevents continued growth in an unclaimed benefit that they might switch to later.

“It can be corrected,” Mr. McAdams said, “but officials have declined to review this more broadly, so some of those who are not receiving their full benefits would never know it.”

The Social Security Administration did not respond directly to Mr. McAdams’s assertion, but it said that it regularly notified widows and widowers to check their benefits.

With so many individual variables, financial advisers urge people first to plug their work history and earnings record into a benefits calculator. But the calculator needs to be one that takes into account the actual birth month and year, to best pinpoint the options for which benefit to claim, and when.

The Social Security online calculator, updated in January 2015, is at It is free. AARP also has a free calculator, as does the financial services provider T. Rowe Price. Professor Kotlikoff offers a paid calculator for $40. Other firms also provide calculators.

As a rule of thumb, “the longer you wait, the more you are going to make,” said Ms. Kahl, the financial adviser. “Turn on the higher benefits later — either your or your spouse’s. If you are a woman, chances are it will be your spouse’s.”

In Nevada, Mrs. Brown, who volunteers on the national board of the 4.3-million-member Alliance for Retired Americans, also maintains that “the cost of living has changed and the formula for Social Security survivor benefits needs to be updated.”

“I’m grateful for what I do have,” she said, but, “When you combine paying for utilities, taxes and medical bills, there is not much else left. What happens to the quality of life?”

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