#9 - The Shrinking Social Security Benefit
Reluctant Executor News
Social security can be a lifesaver for many people, but it also takes effort to navigate those benefits after a loss. And those benefits aren't what they used to be.
See how the social security death benefit hasn't kept up with its original value, and look at how the rules around your final payment almost always cause an administrative headache.
LinkedIn post from May 11, 2023
Social Security pays a Lump Sum Death Benefit (LSDB) which used to be the equivalent of nearly $7,000.
Today the payment is $255. What happened?
In 1935 the LSDB paid 3.5% of the individual's covered earnings, maxing out at $315.
In 2023 dollars that is $6,977.
In 1939 the LSDB was changed to pay out 6x the Primary Insurance Amount (PIA), which is the monthly benefit amount at full retirement age. The maximum payment ever made by this rule was $273.60.
In 2023 dollars that is $5,800.
In 1950 the LSDB was changed to pay out only 3x the PIA since monthly benefits had increased almost 80%. The average LSDB payment was $147.81.
In 2023 dollars that is $1,858.
In 1954, the LSDB was capped at $255. The maximum PIA had reached $85, and congress decided to set this as the max LSDB.
In 2023 dollars that is $2,814.
The $255 cap is still in place today.
In 2023 dollars that is $255.
By the way, the average funeral expenses range from $5,000 to $10,000.
Do you know how you'll cover these expenses since you can't count on Social Security?
A first step is to understand and take inventory of your family's assets. Contact me for a template to help you get started.
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LinkedIn post from May 31, 2023
Social security is simple at its surface. Pay into the system when you work, receive payments when you finish working.
But did you know you may have to return money to social security when your spouse dies?
Social security benefits are paid monthly. Benefits earned in a month are paid the following month. For example, benefits earned in July are paid in August.
Social security recipients must be alive the entire month in order to receive payment.
They are not paid for the month of the death.
So if someone dies on the last day of the month, they are not eligible for payment for that entire month.
If SSA was not notified of the death, or was not able to stop the payment in time, the family is responsible for returning the money to the SSA.
This payment can be easy to overlook, especially if the account in which the money was deposited was already closed.
Maintaining a list of income sources and deposit accounts is a great way to avoid issues with overpaid social security. You can download a template to get started tracking this critical information on Reluctant Executor.
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After Loss Support
Reluctant Executor can help you navigate the forms and administration around Social Security. We can also help you evaluate your finances and budgets, ensuring you can account for your total cash flow.
If you or someone you know needs this type of support, contact me at Bill@ReluctantExecutor.com.