by V. Kumar

Created on: September 15, 2008

The calculation of your SOCIAL SECURITY SURVIVOR BENEFIT is similar to that of Social Security Retirement benefits, with certain exceptions and conditionality. To a large extent, it is same as retirement benefit.

ELIGIBILITY FOR SOCIAL SECURITY SURVIVOR BENEFIT

Social Security Survivor benefit is available to the surviving spouse near the retirement age or a dependent child under the age of 18 (there are exceptions). The minimum age for collecting survivor benefit is 60 years.

The survivor benefit is largely based on the retirement benefit.

CALCULATION OF SOCIAL SECURITY SURVIVOR BENEFIT

The first step would be to calculate the retirement benefit, and the age of retirement or the age at which the person becomes eligible for full retirement benefit.

Age of retirement is relevant for survivor benefits to the extent that if the retiree had opted for retirement benefit at the normal age and become eligible for full benefit, the surviving spouse will also be eligible for the same. However, if the deceased had opted for a reduced retirement benefit, then the spouse will also get the reduced amount.

The Social Security retirement benefits are calculated by a complex formula, using the following steps.

(i) Annual earnings for all the years in which you have earned an income are indexed to the value in current year. This is done using WAGE INDEXING, which is somewhat different from inflation indexing, and leads to a higher value because of rising incomes and standards of living.

(ii) Take the earning of those 35 years in which your indexed income was highest. Income during the other years will be ignored.

(iii) All the indexed income of those 35 years is added together, and then divided by 420 (the number of months in those 35 years) to get the AVERAGE INDEXED MONTHLY EARNING or AIME.

(iv) Once AIME is calculated, the MONTHLY RETIREMENT BENEFIT is calculated using a formula that gives a higher credit to initial dollars compared to additional dollars of income, in order to allow higher benefit to lower income workers. In 2002, Social Security 90 percent of the first $592 of a worker's AIME was taken. For subsequent income 32 percent of the amount over $592 through $3,567 was taken along with 15 percent of any AIME amount over $3,567.The income divisions in this formula are called BEND POINTS that are adjusted each year.

(v) Once the benefits are calculated, they are adjusted in subsequent years for inflation, known as COST OF LIVING ADJUSTMENT or COLA.

COMPONENTS OF SOCIAL SECURITY SURVIVOR BENEFIT

There are three components of survivor benefits.

(i) Survivor benefits for the surviving spouse near the retirement age. If the deceased had opted for full benefits then spouse will also get 100% benefit, even if the deceased expired before reaching the age of full retirement benefit.

(ii) A one-time death benefit of $ 255

(iii) Survivor benefits for dependent child under the age of 18 years, or up to 19 years of age if he/ she is in high school and up to 22 years if disabled. In such cases, both the children and the spouse are eligible to receive 75% of the retirement benefits, till the youngest child reaches the age of 18 years. The total amount that the family can receive is between 150 percent and 188 percent of the worker's full retirement benefit amount.

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