Dear Penny,  My husband passed away two years ago. This year, I turned 60 and was under the impression I would be eligible for his benefits. When I called Social Security, they told me that I made too much...

Dear S.,

You’re allowed to collect your late husband’s benefits. But you’re running into problems because you’re trying to take Social Security early. These issues aren’t unique to survivor benefits. You’d face the same hurdles if you started taking early retirement benefits based on your own work record.

First, let me clarify a few things about survivor benefits for readers. If your spouse dies, you’ll often be eligible for survivor benefits, which are up to 100% of their benefit at full retirement age — provided that you wait until your full retirement age, which in your case is 67. Claiming earlier results in a reduced benefit. Unlike retirement benefits, which require you to wait until you’re at least 62, survivor benefits can begin as early as 60, or 50 if you’re disabled. (For a more detailed explanation, check out our survivor benefits FAQ).

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Probably the best-known drawback of starting Social Security early is that you’re accepting lower monthly payments in exchange for more checks over your lifetime. But there’s a lesser-known pitfall: When you work while collecting Social Security early, Social Security withholds part of your benefit when you earn above a certain amount.

If you have a decent salary, that withholding can wipe out the benefit altogether. In 2022, benefits decrease by $1 for every $2 earned over $19,560 for anyone who won’t reach full retirement age during the year. For those who will reach that milestone in 2022, Social Security will only withhold $1 for every $3 earned above $51,960.

As an example, let’s use the average survivor benefit for a non-disabled widow or widower, which is $1,563 per month as of July 2022. It would only take a salary of around $57,000 to wipe out that benefit completely.

Keep in mind that you’ll get whichever is larger: your own retirement benefit or the survivor benefit that’s based on your earnings, but not both.

That’s a lot of bad news that I’ve just tossed out there. But I do have a few rays of light to offer.

Once you reach full retirement age, there’s no cap on your earnings. You could earn $1 million, even $10 million, and Social Security wouldn’t touch your benefit.

Also, the reduction in benefits I just described is only temporary. Should you start benefits early, Social Security would recalculate your benefit once you reach full retirement age. You’d get credit for any months your benefit was reduced or eliminated altogether due to working. That means you’d eventually get bigger checks, assuming you reach full retirement age.

So the decision you face is one that virtually everyone approaching retirement age has to make: Should you claim benefits right away, delay for as long as possible or aim for somewhere in between?

Since it doesn’t sound like you’re ready to retire just yet, I’d hold off on benefits and keep working. Doing so has an additional benefit: You can avoid withdrawing from your retirement accounts, giving you a bigger nest egg when you’re ready to call it quits.

All that is no doubt frustrating to hear. As you point out, your husband spent many years paying into the system. The unfortunate reality is that many people will spend their working years paying Social Security taxes and never collect benefits, or never get anywhere close to what they paid in. Social Security doesn’t have accounts set aside for each of us. The trust simply pays out benefits according to work histories. You can use a spouse’s earnings record to collect benefits if it results in a larger benefit than you’d get on your own.

Some people have to take benefits as soon as they’re eligible because they’re in dire need of the money. It doesn’t sound like this is the case here. Until you’re ready to retire, keep working and delaying benefits. Regardless of whether you get your own benefit or your late husband’s, every month you wait will boost those Social Security checks.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to AskPenny@thepennyhoarder.com.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

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