Social Security may be one of your largest assets. What and when you collect will make a huge difference to your lifetime benefits.
Today’s column responds to questions about what income is subject to the earnings test, how benefits can be apportioned due tot he family maximum, potential effects of public pensions on different benefits, who can suspend retirement benefits and eligibility for widow’s benefits. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc, a company that markets Maximize My Social Security and MaxiFi Planner.
See more Ask Larry answers here.
What Income Will Social Security’s Earnings Test Apply To?
Hi Larry, I will be 60 in January of 2020 and plan on collecting survivor’s benefits based on my late husband’s record. In 2018 I made $29,321. In 2019 I will make about $30,500. I am wondering if Social Security will use 2018, 2019, or even 2020 to figure out how much I earn above the $17,640 limit before they start taking out $1 for every $2 I earn. Thanks, Allison
Hi Allison, I’m sorry for your loss. They’ll use your 2020 earnings. If you file for widow’s benefits in January 2020, Social Security will ask you to estimate your 2020 earnings, and they’ll use that estimate to determine how much of your 2020 benefits need to be withheld. Then, when the year is over and your exact 2020 earnings are known, Social Security will go back and either refund any excess withholding to you or ask you to repay benefits if you underestimated your earnings and not enough of your benefits were withheld . Best, Larry
How Can This Be Fair?
Hi Larry, I retired in July at 62 and my Social Security retirement benefit is $2,136. My Wife, 62, did not work but applied for her spousal benefits os $1,056. We have a disabled since birth adult daughter, 28, who lives in an adult supported living home with 24/7 supervision. She was on SSI. We received a letter shortly after my wife received her letter confirming her $1,056 saying they made a mistake because my daughter was going on SSA and she was going from her SSI amount of $700 to SSA $1,085.70. So now my wife was being reduced down to $726. How can that be fair? Thanks, Dave
Hi Dave, SSI (Supplemental Security Income) is a needs based program intended as a last resort source of income for people who are disabled, blind or age 65 or older and who have little or no other means of support. SSI is funded by general tax revenues, not Social Security taxes. Anyone who receives SSI is required to apply for any other types of benefits for which they may be eligible, including Social Security.
If your daughter qualifies for childhood disability benefits (CDBs), also known as disabled adult child’s (DAC) benefits, she couldn’t refuse to file for them without losing her SSI. And if both she and your wife are eligible for benefits on your record, their benefit rates are subject to the family maximum benefit that can be paid from your record. The reason that your wife’s benefit rate is apparently lower than your daughter’s is due to the fact that your wife elected to take a reduced benefit rate in return for starting to draw her spousal benefits early, whereas CDBs are not reduced for age. Best, Larry
Will My Benefits Be Increased When I Qualify For Spousal Benefits In The Future?
Hi Larry, I am 59 and I plan to retire from teaching when I am 65. I will be subject to the WEP for my Social security benefits based the non-teaching wages earned. If I claim Social Security benefits at any time from from now until to my full retirement age, will those benefits be increased when I apply for spousal benefits once my wife reaches her full retirement age and files for her Social Security retirement benefit? She is 8 years younger than I am and half of her Social Security retirement benefit at that time will be larger than my benefits with the WEP applied. Thanks, Jim
Hi Jim, Probably not. If your Social Security retirement benefits are subject to reduction due to the Windfall Elimination Provision (WEP), then any spousal benefits for which you would otherwise qualify would likely be subject to the Government Pension Offset (GPO) provision. Social Security spousal and widow(er)’s benefits can be subject to offset due to the GPO provision if the beneficiary is receiving a government pension based on their work for a federal, state, county or local entity that was exempt from Social Security taxes. The amount of the offset is 2/3rds of the gross amount of the government pension.
Therefore, any spousal benefits for which you may qualify for in the future would likely be offset by 2/3rds of the amount of your teacher’s pension, which may very well reduce your spousal rate to zero. You and your wife may want to use one of my company’s two tools — Maximize My Social Security and MaxiFi Planner, which are both fully programmed to handle cases involving both WEP and GPO — to help maximize your lifetime Social Security benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry
Am I Allowed To Suspend My Retirement Benefits If I Started Drawing Prior To My Full Retirement Age?
Hi Larry, I was born 1952and started taking my Social Security retirement benefit at 65. My spouse, currently 71, collected his spousal benefit until he turned 70 and then switched to his own retirement benefit. I’m in good health and have just taken a part-time nursing job. I don’t need my Social Security retirement benefit and would like to voluntarily suspend my benefit to accumulate delayed retirement credits. I have called Social Security 3 times and they tell me I can’t suspend because I started taking benefits before 66 but your book says I can. I’d also like to know if I can suspend and collect a spousal benefit until 70 and then switch to my benefit because I turned 62 prior to 1/2/2016. It seems there is an exception to the new deeming rules if born before 1/2/1954. Please clarify. Thanks, Liz
Hi Liz, You absolutely have a right to suspend your retirement benefits between full retirement age (FRA) and age 70, regardless of when you started drawing benefits. Apparently, a lot of Social Security employees don’t understand that fact, so you may need to direct them to the examples in section A.1 of GN 02409.110 from the Program Operations Manual System (POMS).
You may need to be persistent in submitting your request for voluntary suspension, and I would suggest using a form SSA-795 to submit your request in writing. Also, note that you cannot suspend your benefits any sooner than the month after the month you request the suspension, so a delay in submitting your request could cause you to lose some potential delayed retirement credits.
However you could not draw spousal benefits while your own retirement benefits are suspended. The reason that your husband was able to draw spousal benefits was because he had not yet filed for his own retirement benefits. You have filed for your retirement benefits, so you can’t file a restricted application for just spousal benefits only nor can you be paid spousal benefits while your own retirement benefits are voluntarily suspended. Best, Larry
Is It Correct That My Friend Can’t Draw Benefits On Her Second Husband’s Record Because She Married Prior To A Certain Age?
Hi Larry, A friend divorced her first husband after 10 years and remarried at 63. She divorced recently and her second marriage lasted also more than 10 years. She is currently receiving Social Security divorced spousal benefits based on the first husband’s record and would like to apply for benefits of the second husband’s record as those benefits will be higher. However, she was told by Social Security that she is ineligible to receive benefits on the second husband because she was not of full retirement age when she married her second husband. Is that correct? All information we can find online says she should be eligible. Thanks, Laura
Hi Laura, What she was told is not correct. The age at which your friend got married to her second husband is irrelevant as to whether or not she could qualify for divorced spousal benefits on his record. But she couldn’t qualify for divorced spousal benefits on her second husband’s record unless he is currently either deceased, age 62 or older, or is drawing his Social Security benefits. Best, Larry
To learn more about your Social Security options, visit Economic Security Planning, Inc.