After writing my post on life insurance needs when having a baby, a reader mentioned he was disappointed I didn't mention Social Security survivor benefits.
What's funny is that I never think about Social Security when planning for my financial future. We all know Social Security is underfunded by 20% – 30%, and the government will likely raise the minimum age of retirement or cut benefits to make the program whole.
Nobody should expect anything in order to save and earn as much as possible while able. But the reality is we'll all likely get Social Security benefits if we live long enough – just not 100% of what's expected.
Unlike knowing every single passive income stream amount by memory, I had no clue what Social Security benefits I'll be collecting at an “early retirement age of 62,” full retirement age of 67, or at age 70, until writing this post. I'm betting most of you have no idea either.
Everybody should go to ssa.gov and find out how much money they plan to get from Social Security when they retire, and how much Social Security survivor benefit their spouse or child will get if they were to die early. The amounts seem like free money, even though we paid 6.2% – 12.4% in FICA tax for years into the system.
Social Security Benefits At Retirement
Remember the post where I asked when do you finally feel rich? Seeing that I'll be able to collect $2,050 – $3,610 / month in retirement is making me feel rich again!
Check out the chart below based on 17 years of paying the maximum income subject to Social Security tax. I made $27,730 in 1999, so that counts for something too.
Unfortunately, if you look at the last sentence, my numbers won't hold unless I continue to make $118,500 a year until age 62! I'd love to continue making at least $118,500 a year as a retiree, but there's no guarantees since life is so unpredictable.
In order to qualify for Social Security, you need to have worked for 40 quarters, totaling 10 years. You don’t have to work 40 consecutive quarters either. You can work for three years out of college, take a two year vacation by getting your MBA, and then work another eight years to show the world you didn’t waste all that time and money.
Once you’re at the 40 quarter mark, then can you consider retiring early. In other words, the earliest one should retire is between the ages of 28 – 32 (10 years past 18 years old or 10 years past 22 years old after you graduate from college). To retire before then is financially irresponsible.
FS Survivor Benefits
Despite not being able to get the full Social Security benefits if I don't continue to make $118,500+ for the next 22 years, my survivors are at least guaranteed to receive $2,197 a month and up to $5,127 a month total if I were to pass today.
$4,394 for my wife and child is huge because that will cover our entire primary mortgage plus maintenance and homeowners insurance expense. $4,394 = $52,728 a year.
Your unmarried children who are under 18 (up to age 19 if attending elementary or secondary school full time) can be eligible to receive Social Security benefits when you die. And your child can get benefits at any age if they were disabled before age 22 and remain disabled.
Besides your natural children, your stepchildren, grandchildren, step grandchildren or adopted children may also receive benefits under certain circumstances.
The survivor benefits duration up to age 18 – 22 seems reasonable. The important thing for the surviving spouse to do is properly save and invest the money so its there if needed once the child becomes an adult.
Early retirement survival is all about funding the gaps.
Paying For The Greater Good
Let's hope the federal government figures out an equitable way to make the Social Security program 100% solvent. Due to the massive stimulus programs that have now been launched to combat widespread unemployment, government debt is skyrocketing.
In the past, I paid no attention to the survivorship benefits until I started thinking about starting a family. Now I'm worried that the government will have to raise taxes and offload the massive debt burden onto our children.
Despite the instability of the government, I'm more willing to contribute 12.4% of annual income (business owners have to pay double) up to $137,700 (for 2020) towards Social Security given I have children. It's still a lot of money, but at least I should get some income back in my 60s.
If you haven't done so already, go to ssa.gov, create an account, and check out what you could get from Social Security. I'd love for you to share your results as well.
In the meantime, you should also familiarize yourself with all the different life insurance options out there. I like the simple term life insurance policy, however, I should have taken out a variable universal life police back in 2010. If I did, the cash value in the policy would have grown tremendously given it's been a bull market.
Best Way To Get Life Insurance
The most efficient way to get competitive life insurance quotes after having a baby is to check online with PolicyGenius, the #1 life insurance marketplace where qualified lenders compete for your business.
It's much easier to apply on PolicyGenius than go to each carrier one-by-one to get a quote. I've known the founders for years and they have truly built a fantastic resource for individuals and small business owners.
Social Security is definitely a type of life insurance. However, it's always best to count on yourself instead of the government. Please get life insurance to protect your family.
Updated for 2020 and beeyond
52 thoughts on “Social Security Survivor Benefits: Life Insurance For All (Taxpayers)”
You wrote that one can retire early and receive Social Security Benefits as soon as you work 10 years. I had never heard of this. So I went to the SSA website and could find nothing to that affect with the exception of being disabled, you must wait until you are 62 to start.
“By “retirement date,” we mean the month in which you intend to stop working. We assume that this is also the month for which you want benefits to begin. However, if you enter a date before you are eligible for benefits, we will assume you want to start receiving benefits at the earliest possible age (age 62).”
Can you explain this incongruity?
62 is there earliest age you can start receiving Social Security. But in order to do so you need to have worked at least 10 years paying Social Security.
I don’t count it as part of my retirement planning because I’m far enough away and the variables are out of my control, but I am glad that I have paid in long enough that I would be eligible for something once I decided to draw.
I have include SS in my annual updates for my spouse for many years now and considered it when it came to life insurance needs and recommendations for future planning if something were to happen to me. While it can be hard to project what you will get in 20 years or more, what the wife and kids get if you die tomorrow is more of a sure bet and something you can include in advice for them going forward.
Otherwise I do expect to get some amount of SS, and in my calculations I figure it will drop to a 70% payout in around 2035 as they are currently operating. Certainly it’s better to assume you don’t need the money and power to you if even if you collect SS, it only amounts to 10% or less of your retirement income.
I’ve never once considered SS NOT being there; however, I’ve also never considered it part of my retirement plan.
The end game is too easy to manipulate for me to feel it’s worth making a guess at what is there (plus I’m only 28). When I eventually retire, it will just be gravy money that pays for vacations because, hopefully, I will have worked hard enough to make my nest egg.
My pessimistic advice for Generations Y and Z is to assume that you are getting ZERO in Social Security benefits and to save and invest accordingly. I got a letter from the Social Security Administration years ago stating that, under our current policies and budgets, that I will only be entitled to roughly 75% of every dollar I put into the “fund”. And I have zero faith in our politicians and their ability/willingness to shore up the program. Not when dropping bombs on Syria and building walls along Mexico are considered more important than the American people and their legal, medical, and financial well being.
The current generation in power will do everything to ensure that current retirees get not just every penny they put in, but all their COL increases. I had trouble sympathizing when a mere 1% increase was announced when I knew that my generation would be lucky to see the money that WE put in (which, like I said, I doubt we’ll ever see).
To me, there’s investing for the greater good and then there’s throwing your money in the toilet. I couldn’t give you an honest assessment of which category Social Security taxes fall into. But frankly, I would be thrilled to have the opportunity to forego benefits in order to get all the money I’ve paid in taxes back. The government’s proven themselves incapable of providing for my retirement. I can do better on my own.
ARB–Angry Retail Banker
It is very important to point out that if the surviving spouse is under the full retirement age and is caring for your child, she or he will ONLY be eligible to collect the survior benefit if they have very little earned income themselves.
The SSA published a PDF entitled:”How work affects your benefits.” The formula on page two states, “If you’re younger than full retirement age during all of 2017, we must deduct $1 from your benefits for each $2 you earn above $16,920.” Thus, if the surviving spouse earns anything approaching a middle class income, she or he will not be able to collect a dime of the spouse-caring-for-your-child benefit.
In the example above, Sam’s spouse would only be getting SS for the surviving child, $2197. I imagine that Sam’s wife has income which would disqualify her from receiving the spousal benefit. Thus, their mortgage would not be covered after all.
I thought it was important to point this out because I have personally known a few women who were shocked to find out they’d be getting zero as a surviving spouse raising minors simply because they worked.
PDF can be found at https://www.ssa.gov/pubs/EN-05-10069.pdf
The government will almost certainly be raising the minimum retirement age within the next decade. They have no choice. I’ll use the UK as an example – they’re currently aiming to raise their pension age from 66 to 67. And that certainly won’t be the last raise.
We all know that government is pretty inefficient with managing our finances for us. That’s why I refuse to trust that they’ll be my contingency when I’m old and crusty. To quote Kevin O’Leary, “money is what will take care of you when you’re old and crusty.” And as such everyone should have a strong budgeting and savings plan! Anything else is financial suicide, and as personal finance readers and writers we’re definitely not a part of the bunch that is running dirty numbers.
“In other words, the earliest one should retire is between the ages of 28 – 32 (10 years past 18 years old or 10 years past 22 years old after you graduate from college). To retire before then is financially irresponsible.”
A small note here — any earnings subject to Social Security taxes count, including part time jobs when you’re under 18. I have earnings (and thus credits) for each year from the time I turned 14 and could have a part-time job all the way to the present day 23 years later.
Now, to be fair, some of those years are very, VERY low (I think I made like $1500 at age 14 via part time work) and thus wouldn’t really help boost the formula for my SS payout…but they’re better than filling those years with zeros, and they count as earnings credit quarters.
Hi Sam, new poster here, but long time reader. Thanks for such a rich resource! I learn something new every time I visit — but here’s one for you that I’ve been researching, given my own desire to retire well before ‘retirement age’…
I know that wages count towards your ‘credits’, but its my understanding that no ‘investment income’ does. So anything that you don’t pay social security income tax on, would be excluded from the calculation, the way I understand it — which means that early retirees (*and especially extremely early retirees*) will forego a major portion of their benefit, even if they have high amounts of passive income.
Has anyone else come across this? Or have a strategy for overcoming it?
Howdy! I answered your question with the link at the very end of the post: https://www.financialsamurai.com/what-types-of-income-are-not-subject-to-social-security-payroll-tax/
The strategy to overcome is to not rely on Social Security at all, and to just keep on saving and investing to build passive income.
This is not quite correct if you are a high earner the. Retire early. There is a curve to how much contributions pay off in benefits. I forget the details but it’s well published and somewhat mentioned above. After several high earning years each consecutive year pays a paltry addition. In terms of return just from SS you best bet is several income years way above the limit and then early retirement, this is clearly not best for overall financial strength but just from what you get from social security. Or structure payment after those years as non-W2 income.
Why pay for other people’s retirement when you can pay everything off, collect investment income and have other working stiffs pay for yours?
I’ve looked at my report before, and this post inspired me to review it again:
Benefit at age 67: $2844 / month
Benefit at age 70: $3572 / month
Benefit at age 62: $1940 / month
Disability Benefit: $2719 / month
As a member of the “mass affluent” class, I anticipate my benefits to be cut 25% to 30%, though the underfunding of SS is as much a political creation as a financial one.
BTW, most of the affluent, retired people I know started collecting SS at 62. The reason – they don’t need the extra money at 70, so might as well as collect now.
That’s a good point about taking Social Security at age 62. If you don’t need it, you might as will get it and use it for living it up. Because what’s the point of risking to work wait until age 70 right?
I was thinking it could be cool to collect at 62 and then donate that money to someone or some organization every single month so it’s like them winning the lottery. I think that would be great!
It is cool to see a record of what you made every year – going all the way back to part time high school and college summer jobs.
I agree – I don’t really think of my social security balance as an asset. Hopefully I get some of it and it still has spending power. I doubt it though – the way the government will be able to pay off these debts is to slowly devalue the currency, maybe 1% a year above published inflation, and hope no one notices.
It is amazing that a program that was originally sold as a way to help the poor is actually a program that benefits the middle and upper class by transferring wealth from the poor. Poor people typically go to work sooner and start paying in at a much younger age and then on average die at a much younger age. In addition, the upper class sees social security as just icing on the cake and we will wait until 70 to get full benefits. The poor will be much more likely to start withdrawing as soon as it is available. The government is amazing.
That is a really interesting website though. I have never spent a second thinking about social security but it is nice to see some of the benefits potentially available to me and my family.
Does this change your life insurance recommendations?
Social Security benefits are progressive; those with lower lifetime income receive a higher share of their income as paid benefits compared to those with with higher lifetime income. This is a wealth transfer that benefits the poor, even though middle and upper class individuals secure a larger monthly benefit. SS works well, it helps keep people from destitution and it requires ten years total contribution in order to receive benefits. Here is some more information: https://www.cbpp.org/research/social-security/policy-basics-top-ten-facts-about-social-security
SS is not perfect, but it works quite well. Let’s hope Congressional Ayn Rand acolytes don’t manage to gut it.
My point still stands that low income people are more likely to collect early, which means taking an almost 50% hit and die almost 10 years earlier. So when looking at the percentage benefits received over the lifetime the higher earners come out ahead.
Also, would you support any other tax in the world that after a certain income you no longer had to pay? What if federal tax was taken out at 12.4% up to $118,000 per year at which point you would pay zero in taxes?
That benefit is mostly offset by much higher tax rates above 118k. It’s not as profitable as you think it is. SS is really a welfare program. It over benefits low income earners, vs what they paid in taxes.
I’m high income and will collect at 62. If you invest, this makes sense to do so.
I hope I can modify your thinking here.
Taxes don’t stop at 118,000 (or 127,000). The SS tax stops, BECAUSE you can’t be paid out any more money either. If they took at SS no matter how much you made, they would need to PAY OUT up to that limit, too.
Taxes themselves never stop on income. If you make over ~450k per year, you pay 39% on all income over that. Again, it never stops.
Even low income earnings typically live to 75-80 and they get way more compared to what they put in vs high income earners. For example, someone making $30k/year will have a SS payment of ~$1,300. The person who puts in $127k/year will have a SS payment of ~$2,900. That works out to 2.2x as much money for the high earner but he/she paid in 4.2x as much. In other words, the lower income person gets 2x much per dollar put in as a high income earner.
Also, Medicare especially benefits the lowest levels as their ~1.5% doesn’t even remotely come close to covering their cost of healthcare in retirement.
Do you think they die sooner because as a whole they smoke more, drink more, are more obese?
Maybe it’s just bad luck?
Probably just bad luck.
And they tend to live in more dangerous areas, work riskier jobs, have more stress from broken families and lack of money and less access to the same level of healthcare.
I just tend to think that individual people should be allowed to choose to how to save for their retirement and not be forced into a broken government program.
SS is not broken, in fact it works quite well. SS cannot make life fair, and that is not the objective. It allows people opportunity to rest late in life, and not work until just before death, as was once the case. Especially relevant to lower income individuals.
I’m all for being able to opt out of social security so if back you on that proposal.
I’d lump living in more dangerous areas and being in stressful broken families along with drinking, smoking and obesity as “things that come with poor people making bad decisions”
Id wager access to same level of healthcare is a player but not to the same degree as obesity and smoking.
I know for me I’m not even remotely planning on ss in retirement. I think for me if I get it it would be the icing on the cake. Sadly I know too many people who are both currently depending it because there is zero retirement savings elsewhere, or who are my age and planning on it. I also don’t know if I could be in a high-stress, high-paying job into retirement either.
I have an entire tab on my spreadsheet related to SS benefits, even though I don’t count on them for my future income. My wife used to ask me about what happens if we die, and I would break out the numbers for her.
It is true SS can be changed, and it is true that benefits may not be paid out at 100%, but I think they will be paid out in some form for sure. I don’t necessarily agree with entitlement plans, I simply am aware of them as they exist.
This is a nice post. If only I could figure out how to copy and paste information from that website like you did , nicely into this article.
I’ve checked my SS benefits at ssa.gov but never looked at survivor benefits before. Like you, Sam, I’ve never considered SS when financial planning. I think it will still be there for me in 35 years but likely reduced.
My estimated benefits at 67 are $2,687 per month. At age 70 monthly benefits increase to $3,353.
Surviving benefits for spouse are $2,453.
Again, likely to be less than that when I reach my 60s and not enough to keep me working into my golden years :)
A small update for your post: In 2017 the maximum taxable earnings are $127,200, rather than $18,500.
Thanks. I’m aware, but this is what SSA.gov wrote for my latest number, so we’ll go with that. The payout numbers may be higher if it’s $127,200 forever, as it should.
Note that the 10 years or 40 quarters is just the minimum to qualify for social security benefit. The formula is based on 30 years or 120 quarters maximum. So if you stop contributing after 40 quarters, they’ll just fill in zeros for the remaining 80 quarters.
I like that we’ll get some benefit when we retire, but I try not to include it in any of my calculations. I’m thinking I’ll just blow the SSN money if I get it, on fancy stuff that I wouldn’t have bought otherwise when I retire :)
“In order to qualify for Social Security, you need to have worked for 40 quarters, totaling 10 years”.
That isn’t quite accurate. You need 40 credits, which may not equal 40 quarters.
“The amount needed for a credit in 2016 is $1,260. You can earn a maximum of four credits for any year. ”
So theoretically you could earn all 4 credits in one month of the year and thus be done in 8 years and 2 months, not 10 years. I earned my 40 credits in eight years and five months.
I think it’s more conservative to use 40 quarters than 40 credits don’t you think? I don’t want people reading they can do it faster and then end up with less than they thought.
Can you elaborate on what consists a credit and how it is calculated? This will be very helpful for all. Thanks
The quote above is from the ssa.gov site )
ssa.gov says that they count in credits, not in quarters. Here is the fuller quote:
“The amount needed for a credit in 2016 is $1,260. You can earn a maximum of four credits for any year. The amount needed to earn one credit increases automatically each year when average wages increase.
You must earn a certain number of credits to qualify for Social Security benefits. The number of credits you need depends on your age when you apply and the type of benefit application. No one needs more than 40 credits for any Social Security benefit.”
I started working in the U.S. in mid September 2008. Until January of 2017 when I logged into my acocunt, ssa.gov said that I don’t have enough credits to qualify. In February of 2017, once I had my 40 credits (not 40 quarters), I see the kind of output you have pasted into your blog post above.
Always good to review spousal benefits since I have a wife that doesn’t work. I still wouldn’t be surprised if the eventually means test social security. I’m more worried about medicare’s long term solvency.
Here is mine:
At full retirement age (67): $2,900 a month
At age 70: $3,599 a month
At early retirement age (62): $1,969 a month
Your child: $1,939 a month
Your spouse who is caring for your child: $1,939 a month
Your spouse (starting at full retirement age): $2,586 a month
In my sophomoric youth I never counted on Social Security because everyone *knew* it was underfunded and “going bankrupt” any year now. Right up there with California falling into the ocean “in the next 20 years”…
Now I realize barring major social unrest, there will always be a Social Security, it’s just a question of how much purchasing power that $2K/month will have decades from now. This is one of the reasons I continue to invest in assets that produce income streams that adjust with the market, like rent payments.
No one can predict the future, so it behooves us all to do our best, and remain adaptable to the ever changing present.
I’ve never really considered those Survivor Benefits into any financial planning either. This is a good intro to just what that is.
Fingers crossed. I would rather survive and see what happens in 34 years when I can get full retirement than die now so my wife and kid can become rich. Their overnight net worth would increase by 5 million for them!
At full retirement age (67): $2,835 a month
At age 70: $3,561 a month
At early retirement age (62): $1,908 a month
I turn 50 later this year.
Oh side note… I am divorced and re-married, so my EX gets my Social Security benefits, too. A “double dip” at no extra cost. If you were previously married for at least 10 years, and your ex never remarries, she gets the same amount as you.
Congrats on double dipping! Who says divorce is all bad? :)
Kinda like the umbrella policy covering as many people under your household that you can fit, paying out potentially the max amount mAny times.
And people wonder why the system is underfunded ;)
That’s not even getting into the massive fraud problems…
It’s fascinating to see the numbers on your ssa.gov account. They have a record of all the income you’ve ever claimed. Keep in mind, too, that the times worked in part time jobs growing up count for your quarters too. Hence the reason I am 26 and at 39 quarters. Now, those jobs paid minimum wage or close to it, so I wouldn’t want to use those numbers from a SS view.
My boss is 62 and has worked more than 35 years. He was upset that I told him that those earlier years, at lower income, didn’t count at all in his formula. Yet another reason it doesn’t pay to work forever.
Here’s what I find very annoying about the SS website. There are no calculators that will show you what your benefit will be if you retired early and stopped contributing any income. For example, let’s say I worked for 20 years, and decided to stop working at the age of 40. What would the monthly benefit be once I reach retirement age? Maybe there’s a calculator somewhere out there that shows this, but I haven’t found one yet.
My numbers come out the same as yours in the table you showed, but what I’d like to know is what those numbers would look like if I stopped earning income between now and retirement.
It’s almost like the government doesn’t even want you to consider that possibility ;)
I went through this exercise. It’s a hassle but definitely possible to estimate. You need to download all of the earning records, and factors, into a spreadsheet then do some math… making sure to include a bunch of “zero years” if appropriate.
Based on when I left work a couple years ago (at age 44) I know how much SS benefits I’ll get if I never earn another dollar.
They have such a calculator: https://www.ssa.gov/OACT/anypia/anypia.html
It’s a bit of a hassle to use – when I did it a couple of years ago you had to update text files with estimated earnings for each year from present to retirement, but very interesting to run scenarios.
Bingo! So annoying right? Providing an estimate on if a person retires earlier should be a given. Govt knows that providing such details will hurt SS funding even more.
It’s all about keeping the public comfortably numb, or afraid…..
Here is the one I used.
You have to input all the income yourself, but it’s not that hard because the record is there.
I did a few scenarios with different income estimates. It was a good exercise. Actually, I should update my article now that have a few more years of early retirement under my belt.
Ok, so I ran the numbers based on Joe’s link….thanks Joe!
Keep in mind that my numbers are the same as the ones you already shared in the post.
If I worked 5 more years (I’m 40) at the max income contribution, and retired at 45, with no further income…
The monthly benefit at Age 62 equals roughly $1,650/Month….so you lose out on about $400/month in benefits compared to the original calculation.
I also ran it based on retiring right now, without working 5 more years, and the amount only drops to roughly $1,415/Month.
Interestingly, the survivor benefits remain the same as your table, regardless of the above.
Not a significant loss in benefits in my opinion, especially given the benefits of taping out early!
Thanks for the post. I just checked mine and glad to see that I will be collecting 2-3k depending on the age of retirement as long as I kept making ~$118k or over.
More importantly, an account on ssa.gov can only be made for you once, ever. There have been a rash of people creating fraudulent accounts under other people’s names an claiming early benefits. Then when the person gets to retirement age and goes to get their benefits, they can’t. Never to early to claim your account!