When a spouse passes away, Social Security’s current formula can leave the elderly Penniless

The death of a spouse is probably the most devastating financial blow that can befall an elderly person. In order to alleviate the financial impact of a spouse’s death, Social Security has offered survivor benefits since 1939.

In the 21st century, many widows and widowers find that these benefits are not enough to keep them financially secure. Employer-provided pensions are disappearing and stagnant wages are to blame for a large portion.

Many middle- and lower-class families did not have two sources of income in 1939. However, in today’s society, both spouses are usually required to work to maintain their standard of living. When a spouse dies, the family’s income can take a significant hit.

Women are particularly affected by this issue, as the loss of a husband or wife typically results in a 40% reduction in household income (compared to a 22 percent drop for men).

Windows may have to use their retirement funds for a longer period of time because women typically live longer than men. And three out of every four women are widows by the time they reach the age of 85. Many elderly people rely solely on Social Security for their income.

According to Rep. John Larson (D-CT), Chairman of the House Ways and Means Social Security Subcommittee, who has written a bill to increase benefits for elderly widows and widowers, “Elderly widows face high poverty rates, and many face steep reductions in their household Social Security benefits”

When a spouse passes away, Social Security's current formula can leave the elderly Penniless

When a spouse dies, the current benefit formula does not pay for both of their incomes. Retirees whose own Social Security benefits are less than or equal to their deceased spouse’s benefits can only collect the equivalent of their deceased spouse’s benefit amount every month after his death. Her Social Security benefit would be higher than his, so she would not receive any of his benefits when he died. Widows face the same dilemma.

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Consider a scenario in which the deceased husband received a monthly benefit of $1,600, while the deceased wife received a monthly benefit of $800 from Social Security. The wife’s $800 benefit would be added to the husband’s $880 for $1,600 total after the spouse’s death — the same amount as the deceased spouse’s benefit.

From $2,400 to $1,600 a month, that’s a 33% drop in monthly household income! For example, if the surviving spouse was also receiving a $1,600 monthly benefit, she would be unable to collect any of her deceased spouse’s benefits, resulting in a 50% reduction in household income from $3,200 to $1,600 per month.

Widows’ monthly Social Security benefits can fall precipitously, but their monthly household expenses are usually not affected. As a result, widows find themselves in an awkward financial situation.

Fixed expenses such as rent or mortgage, car payments, and insurance may not be affected by the death of a spouse. Because of this, many widows are unable to keep up with their regular monthly obligations.

74-year-old Dierdre Miller of Penacook, New Hampshire is one of many widows struggling to make ends meet in today’s economic climate. When her husband David died in 2015, her household’s Social Security benefit was halved.

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Since then, she has filed for bankruptcy and is on the verge of losing her home. As a result, the retired administrative assistant has no choice but to use a credit card to pay for all of her prescription medications today.

“I’m about to drown. My daughter has been a great source of financial support for me. However, I know I’ll have to put my house on the market at some point.

What am I going to do and where am I going to go?” She ponders the question. Miller says the $22 increase in Medicare Part B premiums is eating into the 5.9% Social Security COLA she received this year (about $100 per month).

Due to the “dual entitlement rule,” widows and widowers will not receive a larger Social Security benefit because they are eligible for more than one benefit of the same type.

Receiving both benefits would be considered redundant or excessive, according to this line of reasoning. GPO, which reduces or eliminates Social Security benefits for government retirees who were not covered by Social Security when they were employed, is based on the same principle.

Despite the fact that widows and widowers are unlikely to receive all of their deceased spouse’s benefits, the formula can be improved so that they do.

When a spouse passes away, Social Security's current formula can leave the elderly Penniless

Social Security 2100: a vision by Rep. John Larson In order to improve these benefits, Sacred Trust legislation has been introduced.

If passed, the bill would guarantee at least 75% of the combined benefits that widows and widowers received when both spouses were alive. Under Larson’s bill, a widow who earned $800 compared to her deceased husband’s $1,600 in benefits would receive at least $1,800 per month in widows’ benefits under the new law.

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At least $2,400 more per month would be available to a widow or widower whose monthly income was the same as her late husband’s ($1,600). For widows and widowers who are already struggling to make ends meet, these increases are not insignificant. Larson’s bill would also eliminate the Government Pension Offset, which aids widows and widowers who are adversely affected by current legislation…

In the event of the death of a dual-earning spouse, Larson’s bill will help ensure that widows and widowers receive adequate benefits.

Widows and widowers would benefit from the Social Security 2100 Act as well as everyone else who receives Social Security benefits, and the COLA formula would be improved as a result. As early as March, the House Social Security Subcommittee plans to mark up the legislation, hoping for a May floor vote.

Dierdre Miller is in favor of Larson’s proposal. When it comes to her, it can’t happen fast enough. A new pair of glasses cost her $800, and now her hearing is failing after she spent $2,000 on dental work and $800 on new glasses. So she has to dip into her Social Security benefits in order to pay for these things.

“Widows are barely eking by.” On the contrary,” says Miller. “We should be a part of society that is recognized and respected. But we’ve been forgotten about.”

Nonprofit National Committee to Preserve Social Security and Medicare is led by Max Richtman, who serves as its president and CEO.

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