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Clients who lose a spouse face an array of challenges, both emotional and financial. In addition to coping with the absence of a longtime companion, they may need to re-organize their finances and find ways to make up for a loss of income. One place to start is Social Security, which accounts for at least half of the retirement income of 71% of elderly single retirees.1
Maximizing Social Security benefits is especially important for women who have lost a spouse. Women as a whole make 80% of what men do, leading to lower Social Security payments and reduced retirement savings.2 They also tend to live longer: A 65-year-old woman has a life expectancy of 86, versus 84 for a 65-year-old man. Yet 83% of women file for Social Security early, lowering their monthly benefit amount.3 Working with your widowed clients to come up with the best strategy for claiming Social Security can go a long way toward improving their retirement and fostering peace of mind.
Clients married for nine months or more may claim either survivor benefits or their own Social Security payments. They can't take both benefits at the same time, but they can tap one for a number of months or years, and then claim the other. The survivor benefit available to a client depends on four factors: the age of the client, the amount the deceased spouse would have received at full retirement age, whether the deceased spouse had reached that age and whether the deceased spouse had begun collecting benefits.
The earliest your client can start collecting survivor benefits is at age 60, even if the deceased spouse was too young to receive benefits when he or she passed away. For example, if a client is 60 and her husband died when he was 58, she can start collecting survivor benefits immediately and let her own benefit grow until she reaches age 70. At that point, when her benefit is greatest, she can claim her own payout.
If your client's spouse died before claiming Social Security, the survivor benefit will be based on the amount the deceased would have collected at full retirement age, in most cases. But in order to collect 100% of that amount, your client has to wait until she reaches her own full retirement age. For example, take a 62-year-old woman whose husband died at 63 without claiming Social Security. If her husband's maximum payout is larger than hers, she may want to start taking her own benefits immediately, and then switch to survivor's benefits when she reaches her full retirement age of 66.
Factoring in other income sources
While maximizing the amount of Social Security benefits can be helpful, it's only one piece of a complex financial puzzle. Depending on the other sources of income available, as well as on short- and long-term financial obligations, the ideal timing of Social Security may differ even between two people with similar payout scenarios. That's why it's so important to consider Social Security with your widowed clients in the context of a well-rounded financial plan that includes a broad spectrum of savings and investment vehicles. For example, growth stocks can help guard against inflation, and variable annuities can strengthen your clients' portfolios and bring them the sense of security that comes with a lifetime guaranteed income.
Widowed clients are especially vulnerable to hasty decisions and poor planning. With your help, though, they can plug the income gap created by the death of a spouse, and go on to enjoy a productive and fulfilling retirement.
 Social Security Administration, Fact Sheet, 2017 (https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf)
 US Department of Labor, “Breaking Down the Gender Wage Gap,” 2014. (https://www.dol.gov/wb/media/gender_wage_gap.pdf)
 Transamerica Center for Retirement Studies, “16th Annual Transamerica Retirement Survey,” August 2015.