SLEDGE: Question of dual entitlement

Q: I have a client who will be 66 in February 2010. His full benefit is $2,075. His wife’s full benefit is $1,295. Can she collect off his record now or at age 66? Could she collect off her own record now at a reduced rate and delay her entitlement on his record until 66, to draw an unreduced wife’s benefit? — Thanks, Aaron S.

A: Aaron, since her full benefit of about $1,295 is more than 50 percent of his (50 percent of $2,075 is $1,037.50), she can’t collect a benefit on his record as long as he’s alive. After all, she can receive more on her own record than on his. But if he were to die before her, then she’d be able to receive a widow’s benefit on his record, since her widow’s benefits will be computed using his full, unreduced amount, not 50 percent of it (assuming he had not elected a reduced retirement benefit; which would also reduce the widow’s amount).

But note that, even if he had taken his benefits at 62 and suffered a 25 percent reduction, the 75 percent he’d be getting ($1,556) would still exceed her own unreduced amount ($1,295). So she would definitely be able to receive a widow’s benefit in addition to her own retirement amount.

This is called “dual entitlement.” SSA adds a widow’s benefit to her retirement amount so that the two together equal the higher amount that he was getting at his death. But now widow’s benefits, like retirement benefits, are reduced if the beneficiary has not reached her full retirement age at the time of entitlement.
For her to receive the maximum widow’s benefit payable on his record, then, he must not have been receiving a reduced retirement benefit and she must have reached her full retirement age at the time of his death.

For example, if he died receiving his full benefit amount ($2,075) and she was also getting a retirement benefit equal to her full benefit amount ($1,295), they’d add a widow’s benefit of $780 to her retirement amount: $1,295 plus $780 is $2,075.

Finally, collecting on one record first at the reduced rate and later drawing an unreduced benefit off the other record at full retirement age, would be possible only in two situations. First, she starts her retirement benefits at age 62, but he waits until 66 to have his begin. In that case she’d have no choice but to defer entitlement on his record until later, since she can’t collect on his record until he does. Second, if he were to die before she reaches full retirement age, she could take her own benefit early at the reduced rate and then apply for the unreduced widow’s benefit at age 66. Widows are permitted to do this, but a wife who is eligible for both must apply for both.