If you are an American, having a better understanding of Social Security benefits is really crucial if you don’t want to miss out on big checks. Diane, a 75-year-old woman, was unaware of the simple rules that made a massive difference in her finances after her husband’s death. She had been collecting her own Social Security checks for over 10 years. According to Kiplinger, she thought she was only entitled to a monthly check of just over $1,000, like many widows.
The emotional devastation when your spouse passes away is easily overshadowed by the financial toll that follows. This also significantly impacts a household’s Social Security benefits. Widows and widowers often experience a plummeting of total household income by 30 to 50%. This is often followed by a tax increase, also known as the widow’s penalty.
Diane was also on the same boat and was only relying on the $1,000 checks each month. However, after a Social Security workshop, she quickly realized that she was actually entitled to a $2,400 survivor benefit based on her late husband’s earnings, as per The Sun.
The woman could have received over $16,800 per year, which translates into $213,000 over her expected lifetime. Additionally, she has also missed out on more than $84,000 in income from the ages of 70 to 75.
Diane is not the only person who had no idea about how much Social Security benefits she is entitled to. According to a study from United Income, American seniors are missing out on over $3.4 trillion, just because of not being aware of some simple rules. While preparing for widowhood is not something anyone wants to do, if you don’t want to experience a financial toll, you should definitely keep in mind these simple methods.
The first and foremost thing for couples to do is plan ahead so the tax bracket doesn’t become a double hit when a spouse dies. In this case, the widow or widower becomes the single taxpayer rather than jointly filing, and therefore sees their standard tax deduction drop by 50%.
Spousal and Survivor Benefits- What You Need to Know:
1) A lower earning spouse is eligible to receive up to 1/2 of their higher-earning spouse’s social security.
2) Divorced spouses who were married for atleast 10 years are also eligible to receive up to 1/2 of their spouse’s… pic.twitter.com/uLT7zqT9te— Gabriel Gallante (@RocklineWealth) September 6, 2024
When you have less income and more taxes to pay, it will not only affect your personal finances but also lead to Social Security cuts. Experts recommend that married couples consider crucial factors such as which spouse has the higher benefit.
The next step is avoiding some common Social Security mistakes, such as filing all the applications carefully and not only focusing on areas outside of Social Security. Averting these errors could help widows and widowers better understand the survivor benefit rules.
Last but not least, retirees should always calculate beforehand. Running the numbers would only benefit your personal finances to maximize the survivor benefits when a spouse dies.
To have a strong grasp of the survivor benefit is extremely crucial, as this could either mean financial security or result in losing out on much-needed cash.
