Social security survivor benefits for my mother?

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Topic Author
peche8
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Joined: Mon May 16, 2022 12:05 am

Social security survivor benefits for my mother?

Post by peche8 »

Hi everyone! I’m new to social security benefits and had some questions about when my mother should file. My father passed away unexpectedly in April. He was 62 and receiving disability benefits ($2,333/mo) at the time. My mom still works part-time for another family member. The original plan was for her to stop working at 65 and file for social security benefits when she reached 70 ($2,305/mo). But when I plugged in her info into opensocialsecurity.com, it said that she should file for retroactive survivor benefits now and then file for retirement benefits when she reaches 70.

1. Does this sound like the right advice or is there something I’m missing? (Part of the reason I’m confused is because I always heard it was best to wait until full retirement age. Also, I’m nervous that I haven’t considered how taking survivor benefits might impact her ACA health insurance and a smaller IRA account that I had planned to help her convert after she stopped working.)

2. Does it make a difference that my father was on disability benefits and not retirement benefits when he passed?

3. Would it be better for my mom to stop the part-time work altogether or reduce her hours? My mom earns $25K/year and likes the work. If she took survivor benefits, she could expect about $20K/year. I wonder if earning that much income while receiving survivor benefits would mean she’s taxed much more. (I only started helping my parents with their taxes last year so I’m new to taxes as well.) I could always help with the $5K difference, but I also want to factor in that working might be a good distraction right now and help my mom stay active/social.

Thank you all in advance!
BarbBrooklyn
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Re: Social security survivor benefits for my mother?

Post by BarbBrooklyn »

When you say "disability benefits" do you mean SSDI? Or private disability benefits?
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JoeRetire
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Re: Social security survivor benefits for my mother?

Post by JoeRetire »

peche8 wrote: Mon May 16, 2022 12:38 amMy father passed away unexpectedly in April.
So sorry for your loss.
But when I plugged in her info into opensocialsecurity.com, it said that she should file for retroactive survivor benefits now and then file for retirement benefits when she reaches 70.

1. Does this sound like the right advice or is there something I’m missing?
It could very well be right. (It's a very good tool).

How did you indicate in opensocialsecurity that your father was on SSDI when he passed?
How old is mom?

In general, if your dad was on SSDI when he passed, your mom may be eligible for some survivor benefits. How much depends on lots of factors including her age.
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ObliviousInvestor
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Re: Social security survivor benefits for my mother?

Post by ObliviousInvestor »

The idea here is that:
1) Her maximum survivor benefit would be the SSDI amount he was receiving ($2,333).
2) Her retirement benefit at 70 is $2,305.
3) So waiting until her survivor FRA only results in an increase of $28/month relative to what she'd ultimately be getting at age 70 and onward if she just files now (retroactively even) for her (reduced) survivor benefit and then just files at age 70 for her own retirement benefit.

Be sure though that you have provided the calculator with information about her current earnings level, so that it can apply the earnings test appropriately. The best answer in survivor situations is typically to file at whatever earliest date does not result in any withholding from the earnings test. That might be the month she stops working, or January of the year she stops working, or her survivor FRA, or January of the year she reaches her survivor FRA.

The calculator is not accounting for taxes though. If her marginal tax rate is extremely high (e.g., due to the loss of ACA cost-sharing subsidies), it may indeed make sense to wait longer (e.g., until she's on Medicare). There could also be other tax planning reasons to file earlier or later. It's hard to say much of anything definitively, as tax planning is very case-by-case.
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Topic Author
peche8
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Re: Social security survivor benefits for my mother?

Post by peche8 »

BarbBrooklyn wrote: Mon May 16, 2022 4:54 am When you say "disability benefits" do you mean SSDI? Or private disability benefits?
Yes, he was on SSDI. No private disability benefits.
Topic Author
peche8
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Re: Social security survivor benefits for my mother?

Post by peche8 »

JoeRetire wrote: Mon May 16, 2022 7:47 am
peche8 wrote: Mon May 16, 2022 12:38 amMy father passed away unexpectedly in April.
So sorry for your loss.

Thanks for your kind words.
But when I plugged in her info into opensocialsecurity.com, it said that she should file for retroactive survivor benefits now and then file for retirement benefits when she reaches 70.

1. Does this sound like the right advice or is there something I’m missing?
It could very well be right. (It's a very good tool).

How did you indicate in opensocialsecurity that your father was on SSDI when he passed? Ah, I wasn’t sure how to specify that my dad was receiving SSDI. On opensocialsecurity.com, there’s a box I can check to say the living spouse is “Currently receiving Social Security disability and expecting to stay on disability until full retirement age.”—but I didn’t see any way to specify that my father was receiving SSDI.
How old is mom? My mom is 62.

In general, if your dad was on SSDI when he passed, your mom may be eligible for some survivor benefits. How much depends on lots of factors including her age.
Topic Author
peche8
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Re: Social security survivor benefits for my mother?

Post by peche8 »

ObliviousInvestor wrote: Mon May 16, 2022 9:31 am Be sure though that you have provided the calculator with information about her current earnings level, so that it can apply the earnings test appropriately. The best answer in survivor situations is typically to file at whatever earliest date does not result in any withholding from the earnings test. That might be the month she stops working, or January of the year she stops working, or her survivor FRA, or January of the year she reaches her survivor FRA. Would that mean it could make sense for my mom to file for survivor benefits if she reduced her hours so that she earns under $19,560 (2022 annual exempt amount) this year?

The calculator is not accounting for taxes though. If her marginal tax rate is extremely high (e.g., due to the loss of ACA cost-sharing subsidies), it may indeed make sense to wait longer (e.g., until she's on Medicare). There could also be other tax planning reasons to file earlier or later. It's hard to say much of anything definitively, as tax planning is very case-by-case. My parents were at the 22% marginal tax rate—but their effective tax rate was more like 0.5%. I used an ACA calculator and it looks like if she reduced her hours to earn ~$19.5K in wages & $20K survivor benefits, she’d pay an extra $2K/year because she’ll reduce her ACA subsidies. That seems okay since that’ll be offset by the survivor benefits—or is there something I’m not considering?
Thank you all for your help! I didn't expect to need to understand how SS benefits worked for a few more years so your advice is much appreciated.
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JoeRetire
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Re: Social security survivor benefits for my mother?

Post by JoeRetire »

peche8 wrote: Tue May 17, 2022 12:40 amAh, I wasn’t sure how to specify that my dad was receiving SSDI. On opensocialsecurity.com, there’s a box I can check to say the living spouse is “Currently receiving Social Security disability and expecting to stay on disability until full retirement age.”—but I didn’t see any way to specify that my father was receiving SSDI.
Hmm. You may have entered the data incorrectly.

I'm pretty sure it doesn't matter if your dad was on SSDI or SSI at the time of his passing.

In the tool, you should indicate that your mom's Marital Status is "Widow(er)" and then fill in the rest, including Deceased Spouse's Information.
You'll need to include their genders, dates of birth, and your dad's date of death, and their PIAs.

I'm assuming mom wasn't also receiving SSDI, so don't check a box that says she was receiving Social Security disability.

Make sure you check the "additional input" checkbox, and the "still working" checkbox.
Choose "Yes" in the "Are you still working?" selection.
Fill in the date when she expects to stop working.
Fill in the monthly earnings.
Then Submit.

Once you have the results, you can then play with other scenarios, such as if she stops working soon, or reduces her monthly earnings. You'll get to see their impact. You may also wish to explore the scenario where mom lives a long, long time, by using a non-default mortality table such as "Assumed age at death".

This is a great tool and can help explore many different scenarios.

If you ever want to share the specific data you entered, you'll see a paragraph at the bottom of the tool that says "If you want to save your inputs, you can right-click this link". If you right-click the link, you can copy and paste a URL that can be pasted here for further exploration and discussion.
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ObliviousInvestor
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Re: Social security survivor benefits for my mother?

Post by ObliviousInvestor »

peche8 wrote: Tue May 17, 2022 1:27 am
ObliviousInvestor wrote: Mon May 16, 2022 9:31 am Be sure though that you have provided the calculator with information about her current earnings level, so that it can apply the earnings test appropriately. The best answer in survivor situations is typically to file at whatever earliest date does not result in any withholding from the earnings test. That might be the month she stops working, or January of the year she stops working, or her survivor FRA, or January of the year she reaches her survivor FRA.
Would that mean it could make sense for my mom to file for survivor benefits if she reduced her hours so that she earns under $19,560 (2022 annual exempt amount) this year?
If she anticipates earning less than $19,560 this year she should probably file ASAP (and as retroactive as possible) for her survivor benefit.
peche8 wrote: Tue May 17, 2022 1:27 am
ObliviousInvestor wrote: Mon May 16, 2022 9:31 am The calculator is not accounting for taxes though. If her marginal tax rate is extremely high (e.g., due to the loss of ACA cost-sharing subsidies), it may indeed make sense to wait longer (e.g., until she's on Medicare). There could also be other tax planning reasons to file earlier or later. It's hard to say much of anything definitively, as tax planning is very case-by-case.
My parents were at the 22% marginal tax rate—but their effective tax rate was more like 0.5%. I used an ACA calculator and it looks like if she reduced her hours to earn ~$19.5K in wages & $20K survivor benefits, she’d pay an extra $2K/year because she’ll reduce her ACA subsidies. That seems okay since that’ll be offset by the survivor benefits—or is there something I’m not considering?
Effective tax rate doesn't matter for tax planning. As far as whether there's something else you're not considering, there could be about a zillion different things. Or not. I always encourage people to use actual tax software to do tax planning (e.g., preparing two different hypothetical returns using TurboTax or similar, to see how the taxes compare). Note, however, that doing so would account for the ACA premium tax credit but would not account for changes in cost-sharing subsidies.
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Topic Author
peche8
Posts: 30
Joined: Mon May 16, 2022 12:05 am

Re: Social security survivor benefits for my mother?

Post by peche8 »

JoeRetire wrote: Tue May 17, 2022 5:44 am Once you have the results, you can then play with other scenarios, such as if she stops working soon, or reduces her monthly earnings. You'll get to see their impact. You may also wish to explore the scenario where mom lives a long, long time, by using a non-default mortality table such as "Assumed age at death".

This is a great tool and can help explore many different scenarios.

If you ever want to share the specific data you entered, you'll see a paragraph at the bottom of the tool that says "If you want to save your inputs, you can right-click this link". If you right-click the link, you can copy and paste a URL that can be pasted here for further exploration and discussion.
Thank you for the great advice about testing all the various scenarios. When I did, I saw that my mom would potentially receive the same $543,421 over her lifetime—whether she stopped working and took survivor benefits now, or took survivor benefits now and continued working reduced hours (earning less than $19,560/year) until she turns 65. It looks like she would earn slightly less over her lifetime ($537,187) if she continued with her original plan and made $25K/year until 65. This is all assuming she takes retirement benefits at 70.

Here are the Open Social Security links for both scenarios:
Take survivor benefits + earn $19,500/year until 65 = $543,421
Take survivor benefits + earn $25K/year until 65 = $537,187
Topic Author
peche8
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Re: Social security survivor benefits for my mother?

Post by peche8 »

ObliviousInvestor wrote: Tue May 17, 2022 6:05 am Effective tax rate doesn't matter for tax planning. As far as whether there's something else you're not considering, there could be about a zillion different things. Or not. I always encourage people to use actual tax software to do tax planning (e.g., preparing two different hypothetical returns using TurboTax or similar, to see how the taxes compare). Note, however, that doing so would account for the ACA premium tax credit but would not account for changes in cost-sharing subsidies.
That's a great point. I'll try testing out the two different scenarios on TurboTax—and maybe consult a tax professional if I'm still unsure. Thanks for your help!
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