Ask Larry: Will My Social Security Retirement Benefit Be Lower If I Stop Work At 62.5?

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 examines whether stopping work before filing can negatively affect benefit rates, understanding eligibility for survivor’s benefits, how the earnings test is applied, potential effects of foreign pensions and auxiliary benefit availability after suspending a retirement benefit. 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:


Will My Social Security Retirement Benefit Be Lower If I Stop Work At 62.5?​​

Hi Larry, I have been working since I was 18 and plan to stop at 62.5. If I stop working and delay receipt of my Social Security retirement benefit until my full retirement age 66 and 4 months, will the benefit be decreased as a result of not working in the intervening years? Thanks, MJ

Hi MJ, Your benefit amount won’t decrease if you have no earnings between 62 and 66. Your Social Security retirement benefit rate is based on your highest 35 years of wage-indexed earnings, so if you don’t have earnings from 62 to 66, those years simply won’t be used in calculating your benefit rate and others will be used instead. On the other hand, if you kept working and your earnings in those years were higher than some of your previous highest 35 years of wage adjusted earnings, then your benefit rate would increase. Best, Larry

Will My Wife Qualify For My Social Security Benefits If I Die Before Age 62?​​

Hi Larry, Both my wife and I are 59. I have had cancer two times but am now clear of it. However was wondering: if I die before 62, will my wife qualify for my earned Social Security benefits? We have no children under 16. Thanks, Mathew

Hi Mathew, Yes, if you die and you earned at least 40 quarters of Social Security coverage (QC), your wife could potentially qualify for widow’s benefits on your record. And if you died before 62, the minimum number of QCs required would even be slightly less than 40.

Your wife would need to be at least 60 in order to start drawing widow’s benefits, and if she’s eligible for Social Security retirement benefits on her own record she would not be able to draw both her own benefits and a full widow’s benefit at the same time. She could basically receive only the higher of those two amounts. She might, however, have several options available to her depending on her age at the time of your death, such as filing for widow’s benefits first and waiting until 70 to claim her retirement benefits, or filing for reduced retirement benefits first and then claiming unreduced widow’s benefits at her full retirement age or later. Her optimal strategy would depend on your relative benefit rates among a number of other factors.

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. Best, Larry

Does Social Security Use The Gross Amount Of My Earnings Or The Amount That Gets Deposited?​​

Hi Larry, I will be over the maximum that I can earn in 2019 prior to turning 66 in early 2020. Will SSA take it all out at once? If so, that means I won’t get any Social Security payment for two months. And do they use the gross amount or the net amount that is actually deposited? Thanks, Scott

Hi Scott, The countable amount of earnings for purposes of Social Security’s earnings test would be any combination of gross wages and net self-employment earnings. If you know that you will earn over the exempt amount of $17,640 this year, you are supposed to notify Social Security so that they can withhold $1 of your benefits for each $2 of that you expect to earn in excess of $17,640. And, yes, they would suspend your whole benefit check for as long as it takes to withhold the necessary amount.

If you don’t notify Social Security and end up earning more than $17,640 this year, you will be overpaid. Once Social Security becomes aware of the overpayment they will propose to recover it by withholding your entire check for as long as it takes to recover the overpayment. You could, however, ask them for a lower rate of withholding.

I would encourage anyone in your situation to notify Social Security as soon as you know that your earnings will require withholding of some of your benefits. It seems preferable to have any suspension of your benefits occur while you have earnings coming in to live on as opposed to having your benefits withheld at a later time when you may be more dependent on your Social Security income. Best, Larry

Was It Correct For Social Security To Deduct My Husband’s UK Social Security From His US Social Security?​​

Hi Larry, My husband died in 2011. He was born in the UK. He worked there from 15 to age 29 when he immigrated to the US. He worked in the US and he became an American citizen. When he received his US Social Security pension, they deducted his small pension from the UK. Recently, I was told this should not have happened but would like to know your opinion. Thanks, Pam

Hi Pam, I’m sorry for your loss. Your husband’s UK pension should not have been deducted from his US Social Security benefits, but I doubt if that’s literally what happened. Unless your husband met one of the exceptions to the Windfall Elimination Provision (WEP), then his Social Security retirement benefits from the US would have potentially been subject to reduction if he also received a pension based on his work and earnings in the UK It sounds like that’s probably what occurred in your husband’s case.

On a positive note, any WEP reduction that applied to your husband’s benefit rate while he was receiving his Social Security retirement benefits would not apply to the rate of any survivor benefits payable on his record. Therefore, if you qualify for a widow’s benefit from your husband’s record your benefit rate will not be affected by his work in the UK. Best, Larry

Can I Suspend My SS And Still Get Benefits For My Daughter?​​

Hi Larry, Can I file and suspend my Social Security retirement benefit in May 2020 and still get benefits for my daughter who will be in High School until May 2020? Thanks, Bill

Hi Bill, If you voluntarily suspend your benefits any time after 4/29/2016, no benefits can be paid to any beneficiaries on your record other than divorced spouses. You would have to actually be drawing your benefits in order for your daughter to be paid child benefits on your record.

You could use one of my company’s two tools — Maximize My Social Security and MaxiFi Planner — to help decide how to file. As I’ve noted before, Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. You may want to at least consider whether or not it would be worth drawing your benefits for the limited period of time that your daughter could be eligible for benefits, and then voluntarily suspend them after her benefits end. Well designed software will allow you to compare your options so that you can determine which strategy would likely be best in your case. Best, Larry

To learn more about your Social Security options, visit Economic Security Planning, Inc.

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