Dear Dr. Don,
I am a 55-year-old widow. My husband died six years ago. If I take the survivors benefit at age 60, will I be penalized if I keep working? Can I take the survivors benefit and then switch to my own higher benefit later?
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I'm not sure whether working penalizes a survivor the same way that working penalizes someone taking Social Security before their full retirement age.
-- Betty Benefits
As a widow, you can start getting a survivors benefit at age 60 and earlier if you're caring for a minor (16 or younger) or a disabled child. If you take a survivors benefit before you reach your full retirement age and there's no child to consider, the benefit is reduced by a fractional amount for the number of months left until your full retirement age.
If you keep working after you apply for the survivors benefit, the potential penalty isn't a reduction in the future benefits you receive based on your work record. The penalty is that you earn enough to have your Social Security survivors benefit reduced. The annual earnings test determines the threshold amount you can earn before benefits are reduced. If you are younger than your full retirement age for the entire year, Social Security deducts $1 from your benefit payments for every $2 you earn above the annual limit. For 2012, that limit is $14,640.
You can later switch to your own retirement benefit as early as age 62. Switching assumes you are eligible for your own retirement benefit and that the payment is higher than what you would receive as the surviving spouse.
Social Security recommends you talk to a representative about your options so you make an informed decision about the approaches in applying for either type of benefit.
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You could decide to wait until age 70 to take retirement benefits based on your work record and by doing so, earn delayed retirement credits. By waiting until age 70 to file for retirement benefits, you would increase your annual retirement benefit by 28%.
You have five years before you're first eligible to receive a survivors benefit. As you approach 60, evaluate your feelings about continuing to work and how that work influences your benefits. If you enjoy your work and you're above the earnings threshold for a reduction in the survivors benefit, I'd suggest you keep working. Your survivors benefit and your Social Security work history will both improve with time.