Q & A: February 2022

Q:  What Happens to My Social Security When I Pass?

Can someone tell me where any Social Security monies that I have leftover after I pass are going?  When you apply, they look at your earnings over your working life.  They look at your earnings over a 35-year period and, after adjusting for inflation, they apply a formula that then tells them how much you will receive monthly.  Now, this formula is based also on how long you will live so there is monies to cover you until you pass.  But if you pass before the monies are used up, where does the balance go?  Your family or spouse don’t get it! 

A:  Whoa, hang on!  That’s not how Social Security actually works.  Social Security benefits are not a savings account that you leave behind to your heirs.  Social Security is designed more like life insurance, or an annuity that provides survivor benefits for a spouse and certain other dependents based on your account if you pass away.

Social Security survivor benefits are based on the amount of your benefit check when you pass and provide valuable inflation-adjusted income to your spouse and other dependents who receive benefits.  If your spouse lives considerably longer than you do, these benefits could be worth even more than what you might have saved and left in your estate.

That said, Social Security has some miserly rules when beneficiaries pass away.  Your spouse, or other estate administrators if your spouse passes before you, must return the Social Security benefit that you received for the month of death, and any received thereafter.  Your family is not allowed to keep Social Security retirement checks received for the month a person dies, even when the death was on the last day of the month.

It’s important to understand that Social Security benefits are not based on the money you and your employer paid in, but calculated on your earnings, as you have observed.  When planning for retirement, it’s important to understand how early retirement can reduce your benefit by as much as 30%, depending on when you were born.  If you wait to claim benefits at your full retirement age you will receive 100% of the benefits that you’re entitled to.  Claim earlier, and you permanently lock in reduced benefits.

The opposite is true when you delay starting benefits past full retirement age.  You can maximize what you receive by working a little longer, allowing your benefit to grow 8% for each year you delay retirement until age 70 due to delayed retirement credits.

Who receives survivor benefits?  Certain family members may be eligible to receive monthly benefits, including:

  • A widow or widower age 60 or older (age 50 or older if disabled).
  • A surviving divorced spouse, under certain circumstances.
  • A widow or widower at any age who is caring for the deceased’s child who is under age 16 or disabled and receiving child’s benefits.

An unmarried child of the deceased who is one of the following:

  • Younger than age 18 (or up to age 19 if he or she is a full-time student in an elementary or secondary school).
  • Age 18 or older with a disability that began before age 22.

Under certain circumstances, the following family members may be eligible:

  • A stepchild, grandchild, step grandchild, or adopted child.
  • Parents, age 62 or older, who were dependent on the deceased for at least half of their support.

Learn more about Social Security benefits with Social Security Publication No. 05-10008  “How Social Security Can Help You When a Family Member Dies”.