Family Security

By Gillian K. Mullings
Insurance & Retirement Planning Advisor
914-222-1373 /

Social Security benefits are part of an important program that may provide a significant measure of financial security for many families. It is a Federal Program funded by workers’ payroll tax contributions. Many consider Social Security to be a Life Insurance, Disability Insurance and Lifetime Annuity/Pension system all rolled into one tremendous program. Today we will look at a very simple example of how Social Security Survivor Benefits may provide family income replacement similar to the way a life insurance policy would work, and what you can do if you don’t qualify for Social Security Survivor benefits.
Social Security is designed to pay a set amount of retirement income benefits to each worker based on the average earnings and tax contributions over their entire work history. Full benefits would normally begin once you reach your Full Retirement Age which, according to, is age 67 for people born in 1960 or later. Limited benefits can be paid out as early as age 62. However, if said worker (John Doe) dies prematurely, SSA will pay up to 180%1 of his benefits to his surviving spouse & dependents.
Here’s a basic example of how this SSA Survivor Benefit based on Mr. Doe’s full retirement benefit of $1,000/mo would work:
• 5-year-old daughter would receive up to 75% of his benefit, or in this case a maximum of $750
• Wife/mother of the minor child also receives 75%2, an additional $750
• 10-year-old step-son…?
With just two beneficiaries, SSA will pay out up to 150% of Mr. Doe’s full benefit. But what about his 10-year-old step-son? Well, since there are additional beneficiaries, the SSA may decide to give the maximum family Survivors’ Benefit level of 180%. Therefore, each survivor in this example will receive $600 for a total family benefit of $1,800/mo. Survivor Benefit payments would continue until the youngest child turns 16 years old, at which point the wife’s/mother’s payments would stop. Each child will continue to receive their payment up to age 18 or 19 when they finish high school.
Now, let’s imagine that the parents are a couple who are living together and raising a blended family, but were never legally married. Only Mr. Doe’s biological or legally adopted child would receive a benefit of $750/mo until she reaches age 18 or 19. Since the surviving parent is not recognized as a legitimate spouse, and the 10-year-old boy is not recognized as a legal step-child, this family will lose $1,050/mo of much needed Survivor benefits. Over the next 10 years, that represents a total loss to this household of $126,000! That could mean a significant reduction in the quality of life for this family.
The first 18 months after the loss of a loved one is the most difficult time for every family. The loss of emotional support and guidance of a parent is hard enough to cope with; the loss of financial support can create serious financial hardship that can rock the foundation of safety and stability they once enjoyed, plus put the brakes on their future plans. If the surviving parent has to get a second job, or work overtime to make ends meet, then it could feel as if the children have lost BOTH parents at once.
This can be a critical turning point for many young families that suffer such a loss; the surviving parent and kids may have to downsize their household, move to a different school system, rely on grandparents or extended family for additional support. Whichever way they decide to work out their situation and ‘make do’ during this difficult time, their lives are irrevocably changed.
On the other hand, an individual Life Insurance policy on Mr. Doe’s life would have been able to provide funds to any beneficiaries of his choosing regardless of marital status or biological family ties. Plus, the Life Insurance proceeds would be in addition to the SSA benefits, which would help to provide many years of financial security for this family. This is especially true if the children are older teenagers who no longer meet the SSA Survivor Benefit age thresholds, but are still attending high school with plans to attend college.
The idealized, traditional American family of a two-parent household headed by a mother and father is far less common today than it was in the past. Social Security is great for many reasons, and it’s important to understand how it can work to secure your family and future. However, because Social Security’s benefits are tied to outdated family models that are no longer suited to many of today’s modern households, it is even more important to learn about additional ways that you can help to enhance your own financial security over the long term.

1, 2 – “Survivors Planner: How Much Would Your Benefit Be?”

This information is not intended as tax or legal advice. For advice concerning your own situation, please consult with your appropriate professional advisor. TC92346 (1016)1

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