Today’s column addresses addresses filing a restricted application for spousal benefits only versus filing and suspending a retirement benefit, the earnings test, the possibility of collecting past benefits not filed for and how the earnings test is applied and how it affects eligibility. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, a company that markets Maximize My Social Security and MaxiFi Planner. Both tools maximize lifetime Social Security benefits. MaxiFi also finds retirement account withdrawal strategies and other ways to lower your lifetime taxes and raise your lifetime spending. Most important, it suggests how much to spend and save each year to enjoy a stable living standard through time.
See more Ask Larry answers here.
Ask Larry about Social Security:
Can You Help Me Understand Social Security’s Filing And Suspending Strategy?
Hi Larry, I wanted to take advantage of the file and suspend rule and wanted to claim my divorced spousal benefits based on my ex-husband’s record and freeze my benefits until a later time. However the Social Security agent told me that I could not do it because my spousal benefit amount was smaller so I could not file and suspend. I thought that I could collect my spousal benefit at the lower rate until I was ready to claim my retirement benefit. Can you you help me understand. Thanks, Tasha
Hi Tasha, The most important thing for you to understand is that you do not want to use the file and suspend strategy. Filing and suspending describes a strategy of filing for your retirement benefits at full retirement age (FRA), but then suspending them in order to accrue delayed retirement credits (DRCs). DRCs are earned at a rate of 2/3rds of 1% per month (i.e. 8% per year) for each month that you defer taking retirement benefits between FRA and age 70. Thus, by waiting until age 70 to start drawing your retirement benefits you can receive a benefit rate that’s 32% higher than your FRA rate. You also earn DRCs at the same rate of 8& per year if you simply delay filing for your retirement benefit rather than filing for it and then suspending it.
The reason that you don’t want to use file and suspend is because if you file for and suspend your retirement benefits you can’t draw any other type of benefits, such as surviving divorced spousal benefits in your case. Assuming that you meet the requirements, what you could do instead is simply file a restricted application for just surviving divorced spousal benefits only. You could then file a separate application for your retirement benefits when you reach 70. You’ll will receive the same amount of DRCs if you simply wait until age 70 to apply for your retirement benefits as you would if you filed for and suspended them. You would likely want to file for the surviving divorced spousal benefits as soon as your earnings would permit payment of benefits, so if you’re not working or earning too much you would probably want to file ASAP.
You may want to use one of my company’s two tools — Maximize My Social Security or MaxiFi Planner — 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.
How Will Returning To Work Affect My Benefits?
Hi Larry, I was born in 1949 and started SSI at 63. I may return to work now. How will this affect my existing SSI payments? Five years ago I exceeded the allowable income and had my SSI suspended, so I quit shortly after, started getting my SSI 12 months later. Thanks, Al
Hi Al, If what you are receiving are Social Security benefits and not Supplemental Security Income (SSI), then your benefits would be payable in full regardless of how much you work and earn. That’s because you are already past your full retirement age of 66, so the Social Security earnings test no longer applies to you.
On the other hand, SSI is a needs based benefit administered by the Social Security Administration, so if that’s what you’re receiving then any increase in your income could result in a reduction or suspension of your benefits. Best, Larry
Can My Mother And Mother-In-Law Claim Past Due Benefits?
Hi Larry, My mother and mother-in-law never drew Social Security until the death of their spouses. I of course don’t know if it’s true but I recently read on the internet that a spouse could get benefits even if they never worked the entitled number of segments. My understanding is that they were both entitled to claim Social Security spousal benefits at 50% of their respective husband’s retirement benefit amount. Cam they claim past due benefits? Thanks, Chuck
Hi Chuck, Just to clarify, your mother and mother-in-law couldn’t have drawn benefits based on their own work records unless they had enough quarters of coverage to be insured. However, either or both of them may have been able to draw spousal benefits prior to their husbands’ deaths if they met the requirements for entitlement.
In order to qualify for spousal benefits on a living spouse’s record, a person must be at least age 62 or have an eligible child of the worker’s in their care. And their spouse must be drawing their Social Security retirement or disability benefits.
If your mother and mother-in-law would have been eligible for spousal benefits and didn’t file for them, it would likely be too late to claim them now. Social Security spousal benefits can only be claimed retroactively for a maximum of 6 months prior to the month that an application is filed. Best, Larry
Can You Confirm That My Daughter And I Could Draw Benefits If I File At Age 62 Regardless Of My Wife’s Earnings?
Hi Larry, I will be 62 shortly and will have a 10 year old daughter at that point. Your book and the Social Security website seem to indicate I can collect an extra 50% since she’s under 18 and I’m retired. Can you confirm that this is the case even if my wife, who would only be about age 50 at that point, will still be working? Thanks, Brett
Hi Brett, Yes, provided that you have enough work credits to qualify for Social Security retirement benefits, you could file for your benefits at age 62. And, it certainly sounds like your daughter would then qualify for child’s benefits on your record. Your wife’s earnings would have no effect on either your Social Security benefits or those of your daughter, provided that you are both drawing benefits on your record and not on your wife’s record. However, your wife’s earnings could prevent her from receiving child-in-care spousal benefits on your record.
If you file for your retirement benefits at age 62, your benefit rate will be reduced by roughly 27% from your full retirement age rate. Your daughter, though, could get an unreduced amount equal to 50% of your full retirement age rate. The downside to filing early is that you will then likely be stuck with that lower rate for as long as you live. Best, Larry
Do I Need To Ask SSA To Use The Annual Earnings Test Instead Of The Monthly Test?
Hi Larry, I will be 63 next year and plan to have my Social Security retirement benefits start in January. I also plan on working part time starting January 2020 and expect to have varying months of income with my total income being around $16,000 for 2020, so probably under the annual earnings limit. Will SSA use either the monthly or annual earnings test for my income next year? Do I have to request SSA use the annual earnings test when I first apply or do they choose? Thanks, Sean
Hi Sean, The Social Security Administration (SSA) always uses the annual earnings test unless the monthly test is more advantageous for the beneficiary. SSA never even considers using the monthly test unless a person earns more than the annual exempt amount. Therefore, as long as you earn less than the 2020 annual exempt amount, Social Security will default to using the annual test in your case. You won’t need to ask them to do so. Best, Larry
To learn more about your Social Security options, visit Economic Security Planning, Inc.