Social Security: Surviving Spouses

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Well, today's show on Finishing Well, I'm really excited because there is a lot of new material that I'm really excited that people are going to find out that I think extremely helpful. Today's show is we're calling Social Security Surviving Spouse, or actually Surviving Spouses, because it could be either the man or the woman as the case may be. And there's benefits that are in this that really, as I've been talking to Hans, you know, I just found out about, but it's clear, biblically, that just in the Old Testament alone, there's 105 times that God brings up widows and orphans.

I'm telling you, it's near and dear to his heart that we take care of widows and orphans. And it's very much in that culture, you know, it was a tough, tough situation because if the man passed away in that day, you know, there was no way for a woman. They weren't laborers. They couldn't go out and get work.

They didn't own the farms or whatever. And so, you know, like Naomi and Ruth in the Book of Ruth, you know, they had to go out on the edge of the field and glean. And, you know, it was up to the culture to take care of the widows and orphans. And so it's very, very near and dear to God's heart. So I'm hoping that even though you may not yourself be a widow or an orphan or a surviving spouse, that through some of the material that you hear about today or, you know, that you might help somebody that is even younger, that you did not know about these particular benefits through Social Security. But also as we think about, wow, at some point in time, my spouse, you know, if I pass away first, it's going to be the surviving spouse.

And what have I done to plan to make sure that, you know, I'm leaving the best legacy possible with my own setup? Yeah. Well, did you tell me 105 places in the Bible? And just the Old Testament. Just the Old Testament that widows and orphans are mentioned.

Well, that's amazing. And it is our calling and it's the calling of the church to take care of the widows and orphans. And the Social Security system is taking care of the widows and orphans to the extent that they're able. It really doesn't take care of them necessarily well, but it takes care of widows and orphans and people that at least historically were too old to work or too sick or, you know, intended to be a retirement benefit. And it is. And, you know, you want to get people fired up about Social Security and people get fired up about the subject even off of our show where they're just saying, oh, they're not going to have enough money or they're this or they're that or it's not funded or the government's spending all the money on something else. You know, the reason they get so fired up about it is it's just so important. I mean, there's $3 trillion, you know, about in the Social Security trust fund and there's money pouring in there every day from current workers.

And so it's, you know, you could say it's bad off but it's well off if you really sit down and look at it and it needs some adjustments made. So what we're talking about today is really widow benefits, surviving spouse benefits. If your spouse dies, what is Social Security going to pay you? What sort of a safety net is there?

Okay. And something just in our discussions in preparing for the show that Robbie wanted me to bring up was just the benefit if your spouse dies is and you're under 60 or way under 60 and you have young children at home. You're going to be entitled to collect a Social Security benefit based on your deceased spouse earnings history and the number of children that you have. And you're going to be able to collect that or they're going to be able to collect it and they're going to send it to you, the surviving spouse, until those kids reach like 18 or graduate from high school.

Somewhere, I don't know the exact rules because I don't deal with it day by day but it's, I've just about stated it to you correctly so I probably need to look it up before you rely on that. But there's a benefit. And in the example, we have a lady who's a friend of ours, my wife and I, who she stood up with us in our wedding. And she is exactly my wife's age because she went to grade school with her in high school and they're 61. They had just turned 60 so this has been a little over a year ago. And they, she lost her husband probably 25 years ago. And so she's just been making do, kids growing up and she mentioned that she got a Social Security benefit until her youngest son reached like 18 and then it stopped. And then she hadn't gotten anything from Social Security and she really was just kind of negative thinking that she really isn't going to be entitled to much. And she listened to this show on Facebook, she called my wife and she started asking my wife, am I entitled to a benefit at 60 because we both just turned 60. And my wife said, hey, you're going to have to talk to John, you know, Ron.

So I talked to her and, you know, she was just telling me, she was telling me all the rules, how this won't work and that won't work. And I got her to get an appointment with Social Security, go down there, talk to them, have them look up her husband's whole record. She's getting 1800 bucks a month. Now that's the discounted amount because she was 60 and maybe a little bit, 60 in a few months. And she would have gotten more if she'd have waited until she was 67 or 66 in 10 months or whatever her full retirement age based on her age.

But she couldn't afford to wait and this was a real blessing. So what I want to tell the widows out there or widowers or the surviving spouses is if you don't have young children, there's nothing for you now. Or if you're like 53 or 45 and no young children, there's nothing for you now. And the earliest you can start getting a benefit based on your deceased spouse is age 60. But it's reduced. It's reduced because it would be the full benefit at age 67.

So I would just guess that her benefit of 1800 a month had she waited maybe would have gotten as high as 26, 2700. So most widows when they have an option and they qualify, they take it. Now there's another qualification. Had she remarried after the death of the first husband and she remarried before 60, she wouldn't be able to file against his record.

Okay. But she qualified on that. And so, you know, the answer to all that is having proper life insurance in force. Now, if you're two working people and you don't have any children, I guess if one of you dies, the other one is going to be able to just kind of go back to living like they were beforehand with, you know, maybe no life insurance. But as soon as you bring kids into the mix, I mean, life insurance has become so necessary and it's so sad so many people are uninsured or not properly insured today. I think some of that has to do is nobody's out.

People are not out selling it anymore like I did 34 years ago. In any case, I'll just tell you, I just became a grandfather for the first time back in February and while my daughter-in-law was pregnant back in the end of last year, I talked to them. I said, if I buy a quarter of a million dollars worth of term insurance for both of you and I pay the premium for the first year, are you going to go along with that? And they said, oh, of course, that's great.

So we did all that. They didn't have to take a physical because they just had to go through whatever they had to go through. And my son's 33, his wife is 31, they're in good health. It was $330 a year for him and like $290 a year for her. And that premium is guaranteed for 30 years.

They have a quarter of a million each. And I can just tell you that if one of them dies, they don't see that coming, I don't see that coming, but if it happened, you know, that quarter of a million bucks is going to make a huge difference. And 60 is a long time away for her. Now, granted, she would get something from Social Security for their one son that they have, but it's certainly not enough to replace his income or vice versa.

He's going to be more of a pickle if she's gone than she is with him gone. But either way, I mean, life insurance is really what Social Security is trying to replace is the fact that people didn't have that or you need both. But talking about widows, you're eligible for a benefit starting at 60 and you're going to be better waiting till 67 if you want to get the most benefit. So, and again, if you have proper life insurance and assets enforced, maybe you'll be able to make that choice at 60 instead of having to take it. Which brings us to the other part of the show, which is those of us who, you know, are at the stage where we're 62 or 63 or even 59, I guess, and beginning the planning process of, okay, this picture is changing. And if my spouse survives, right, as I began to budget this and think about it, well, let's see, if I pass away, Tammy's still going to have, you know, the whole property tax.

That's not going to go down because Robbie's dead. You know, she's our power bill. I can't imagine it's going to go down much because, I mean, in other words, when I look at her budget, there isn't much that goes down because all of a sudden I'm out of the picture. So we have, and we're going to lose one Social Security check at the point we're both there, right? Then, okay, what are we going to do to make up for this income loss? And so there's lots of financial instruments we can do that with. But once again, you've got life insurance and do it, you know, speak into that a minute. Oh, sure.

Well, it's just, it's a planning issue. And, you know, you kind of discovered this today because as I've taught you Social Security and I've showed you that by waiting and all the things you're doing, which you're kind of doing now, I mean, you're not there yet where you're actually waiting because you haven't reached full retirement age. But you've got this whole picture put together for Tammy where she's going to have a nice Social Security check if she lives longer than you do, okay? But what you've also learned is if you die in the next several years or the next few years, whatever you want to add up, she's going to, number one, she's going to have to wait until she's 60 to start getting that check.

Number two, if she takes it at 60, which she might have to, she's going to get a whole lot less than she would have gotten if she took it at 67. So you've just identified that, and thank God you have life insurance so that if something happened to you, she's going to get a nice big check for life insurance. And then if she does some proper planning, she's going to be able to say, hey, I don't need to take that Social Security at 60 because I can live off of this. I can let it build or maybe she will take it. I mean, we'll just, and then she'll have that plus the life insurance for her whole life. I mean, that plus the Social Security check. So, you know, it's just a planning issue, and so you're in that zone where a lot of our clients that are incoming, you've got life insurance.

You've got a Social Security check in the future, but it could be race to the present if one of you were to die. You intend to work a long time. We've got a whole lot of show that's still left to do. We've got to go to a break. Again, don't forget, this is certified financial planner, Hans Scheil.

His book, The Complete Cardinal Guide to Planning for and Living in Retirement is available at cardinalguide.com. We'll be right back. As you can see, we've got a whole lot more to talk about.

Yeah. Hans and I would love to take our show on the road to your church, Sunday school, Christian or civic room. Here's a chance for you to advance the kingdom through financial resources by leveraging Hans' expertise in qualified charitable contributions, Veterans' aid and attendance, IRAs, Social Security, Medicare and long-term care. Just go to cardinalguide.com and contact Hans to schedule a live recording of Finishing Well at your church, Sunday school, Christian or civic group. Contact Hans at cardinalguide.com. That's cardinalguide.com. Welcome back to Finishing Well with certified financial planner Hans Scheil, as always kind of brought to you by his book, The Complete Cardinal Guide to Planning for and Living in Retirement. They're available at cardinalguide.com. When we left our hero, Hans, he was rolling.

He really was because I get to see his heart like, oh, my goodness, so many of his clients find themselves here. We're losing one of our Social Security checks. We've got to replace income.

We've got to figure out how are we going to go from here and how are we going to plan for that. That's the biggie is that so by listening to this show and getting tuned into our work and the work we do with so many people, many of them in their 60s, a few in their 50s, a lot of them in 70s doing makeup work. I mean, where people are just saying, oh, man, I didn't do that, I didn't do this. And then they think they're too old for this. They're not. But the Social Security, where people have learned about Social Security and they start to understand it. And what they understand real well is they got two checks coming in, one for her and one for him.

But they're really for both of them. And they run their household income. And they start learning that, you know, we don't have to pay much tax on this money if we don't have a whole lot of other income.

So then they defer it. And they're just kind of marching along, living off those Social Security checks. And because of their after-tax money, there is no tax on them. It makes the checks feel a whole lot bigger than they are relative.

They're just kind of living on them. One of those people passes away, the household goes from two checks to one check. The simplest way to understand this is when the first person of a married couple that dies, the smaller check stops.

I was just explaining this to an incoming client the other day. I said, you know, your Social Security check is about $2,500. Hers is about $1,500. It's going to be about $1,500. So you're going to have about $4,000 a month in Social Security. And you're just going to march right along.

It's going to increase with inflation. And that's pretty nice. And then when one of you dies, it doesn't matter which one, her $1,500 check is going to stop. So if she dies first, well, it's obviously, you know, hers is going to stop. You'll just get yours.

If you die first, hers is going to stop because she's going to get yours and hers goes away. So that's something you really need to plan for. It's pretty shocking to have a $1,500, which many times is tax-free reduction in income.

Right. And as you were explaining that, I was sitting there thinking, because I heard you say that because I'm not being taxed on my Social Security, right, that you're holding on perhaps IRA money that's sitting in there and you're not taking that because it makes your Social Security feel like it's more money. But in reality, wow, there sits – if you've got an IRA sitting there by doing some distributions into life insurance, you really are running the board because you're not only reducing your income tax, obviously, you know, but when – because life insurance will pay out tax-free not only for your surviving spouse but for your kids.

If you both end up, you know, going together, you know, like my wife always tells me we are, by the way. We have a lot of people sitting on IRA money. And they're sitting on IRA money because they can live well enough on their Social Security checks.

And they think they're winning the game. And maybe they just take the minimum distribution, then they all of a sudden face this, the 1,500 bucks of what has been tax-free money disappears. And then you got all those years where they could have been taken more out of their IRA, still paying no tax, and they could have just been depositing it in something else or like you said, buying life insurance. It doesn't take a lot of life insurance to make up for this. Maybe you don't have to make up for all of it and life insurance is tax-free too.

So, you know – Yeah. When I was thinking about it, I was like, wow, probably if you took a distribution, a life insurance policy, you know, that would cover an income of say, you know, $1,200, $1,500 a month would be what? Like $250,000 or something like that for a pretty good period of time? So you're talking about the benefit is $250,000. Right. And so that comes tax-free and then it's invested in something like an annuity that's going to shoot out an income.

Yeah, that's a pretty good guess. Okay. So, you know, if you were using the IRA money, you know, just distributing it into while you're both living – You're going to have to make a distribution, pay the taxes on the distribution, but if you're not taking much in distributions, there may not be much tax.

Right. If we're – you know, again, we just got to play the numbers, but even if there was some tax, you just pay it and then you buy the life insurance and then you're going to create this big sum of money so we don't even need to solve the next problem. You're still going to have $2,500 a month.

In other words, the surviving spouses. You're not going to have $1,500 and you're going to have a check for a quarter of a million bucks and then we'll solve it then. And some of that may depend upon your health and your needs and how you invest that, but yeah, we can work it that way where we're just replacing that 1,500 bucks. My whole point is that people that don't think of this and they don't really think of like what life is going to be like when they live on as the one person, it's going to be with a lot less income and a lot less tax breaks. So there's just – there's a need for a pool of money.

Now, there's a lot of ways. Life insurance is just one way to make up for that. So we really want to get – what we're talking about in the show here is we're really talking about what are the widow benefits or the surviving spouse benefits of life – I mean of Social Security.

And when you're under 60, they ain't much but to wait for a promise. When you've reached 60 and your spouse hasn't started Social Security yet and you didn't have a much larger or a larger or a smaller benefit, well, sure, there's a benefit there where you can collect on your deceased spouse benefit. But when you both make it up to Social Security and you got the checks going and you're on into your 70s, now it's the reverse of life insurance because money is going to go away when one of you dies instead of money coming at you.

And you said – you let this slip out but it made my mind jump on it. You said – and you had some good tax benefits. In other words, as long as Tammy's around, I get to file jointly, which means my income can be a lot higher before I have to consider the situation.

So wow, wow, you are still jointly. Standard deduction is higher. Standard deduction for a couple over 65 is over 26 grand. You just get a tax deduction without doing anything for them. Now, they come in lieu of your other deductions but – and when you're a single over 65, that number is like 14,000. Yeah, and that's what I'm pointing out. Like if there was a time to be making the distribution, right, you got 10 grand difference.

Absolutely. Well, both of you are alive. And then where do you put it? Well, you can put it into a lot of things. I mean you could do a Roth conversion if you're young enough and you haven't reached minimum distributions. If you've reached minimum distributions, you could take just the minimum and you could buy life insurance for that. You could take more than the minimum and you could buy a very high performing cash value whole life insurance that would actually accumulate a savings account. So if you both make it into your 80s, then there would be a cash value available that you could – you're both alive. You both got the checks coming in. But now you've got a bunch of your savings moved over into this life insurance and now you're kind of making it. You can start borrowing from that tax-free in Lebanon. I mean there's all kinds of things we can do, but what's driving the underlying system is the Social Security benefits that you're – Currently getting two of. Right. And, you know, striking, you know, just like you were saying in the beginning of the show, when you're 30, it's pretty easy to buy life insurance.

You know, pretty inexpensive. Well, if you make these plans when you're 50 or 60, you know, it beats 70 or 80, but it's sure better to make them when you're 80 than not make them at all and find yourself at 85. You know, we end up with a spouse that isn't able to, you know, I guess be able to meet their needs or have to sell the house or, you know, I've got my good friend and you actually have helped her many times and helping her a lot right now. But, you know, after her spouse died, unfortunately, with no life insurance, you know, she's left with this house. And how do I keep up the house? You know, when I've got one Social Security check coming in and at the end of the day, you know, it didn't – she ended up getting a reverse mortgage, which we knew wasn't the best financial plan in the world, but it kept her going.

Well, sure. And, you know, this is why we have more and more people in their 60s that are retiring, planning for retirement, retired. They're buying $100,000 of life insurance each. And, you know, if they live – both of them live a good long life, then that money is just going to go to their kids tax-free. But if one of them goes early and the other one lives on or, you know, early could be in their 70s sometime, you know, just $100,000 and you pay some final expenses and, you know, you got $80,000 or $85,000 left tax-free money that's sitting there that you can draw from without paying taxes, that can get you through a bit of a pinch. And, you know, people can just budget that and we can budget that right out of your IRA and just start some distributions right in your 60s somewhere right after you retire.

You know, it's sweet. But the idea underneath it goes, okay, you know, and we're hoping – I know that every week as we get a chance to record here, I get to think through, gee, how am I planning for this situation, you know, for that situation to finish well? Because finishing well means, you know, leaving a financial heritage for not just Tammy but my kids and all that's going on there. So, again, how do you do that?

Well, you know, we just keep learning what God gives us, which you can go to cardinalguide.com, get the book, The Complete Cardinal Guide to Planning for and Living in Retirement, which is, you know, if you email Hans, I'm sure he will send it to you free. But we are so grateful for you listening. We have so much fun doing the show, so much fun.

We run out of time every week and we've run out of time. Thank you, Hans. Thank you. We hope you enjoyed Finishing Well, brought to you by cardinalguide.com. Visit cardinalguide.com for free downloads of this show or previous shows on topics such as Social Security, Medicare, IRAs, long-term care, life insurance, investments and taxes, as well as Hans' bestselling book, The Complete Cardinal Guide to Planning for and Living in Retirement, and the workbook. If you have a question, comment or suggestion for future shows, click on The Finishing Well Radio Show on the website and send us a word. Once again, that's cardinalguide.com. Cardinalguide.com. This is the Truth Network.