Ask Larry: Will Income After 66 Increase My Social Security Retirement Benefit?

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 whether income after 66 can increase benefits, whether spousal benefits may end when other benefits begin, restricted applications before FRA, whether to file and suspend now and how bonuses are treated by Social Security. 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 here.

Will Income After 66 Increase My Social Security Retirement Benefit?​​

Hi Larry, I will be 66 in September. Upon reaching 66, I will have only 23 years of employment that will be used to determine my Social Security retirement benefit and the rest of the years are zeros. If I continue to work until 70, will those last four years replace four zeros? Will I then have 27 years of employment that will get used to determine my Social Security benefit? Or do only the years of employment before full retirement age replace zeros? Thanks, Betty

Hi Betty, Yes. Your yearly earnings can be used to calculate your Social Security retirement benefit rate regardless of your age at the time you had the earnings. And your retirement benefit rate is based on an average of your highest 35 years of wage-indexed earnings. So it sounds like you could work for another 12 years and still be replacing zero earnings years that would otherwise be used in the calculation of your benefit rate.

You would not want to wait past 70 to claim your retirement benefits, though, because you wouldn’t earn delayed retirement credits after reaching 70. Your benefit rate could, however, be recalculated and increased after any future year in which you have Social Security covered earnings no matter how long you continue to work.

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

Will My Wife Still Get Spousal Benefits When I Start Drawing My Benefits At Age 70?​​

Hi Larry, We set it up so my wife could get benefits on my record before I actually start my retirement benefits. Will my wife still continue to receive spousal benefits once I retire and start drawing benefits at age 70? Also, what happens to my wife’s spousal benefit, when I die? Thanks, Liam

Hi, Liam I assume you mean that you filed for and suspended your retirement benefits before 4/29/2016, and that your wife is currently receiving spousal benefits on your record. In that case, her benefits won’t change when you turn 70 and start drawing your benefits. And if you die before your wife, her spousal benefits will convert to widow’s benefits and she’ll receive an amount equal to the full benefit rate you were receiving at the time of your death assuming that she isn’t entitled to a higher benefit amount on her own record. Best, Larry

Can My Sister File A Restricted Application For Divorced Spousal Benefits At 62?​​

Hi Larry, My sister will be eligible for divorced spousal benefits. She would like to start at 62, due to low income, and her former spouse is the same age. Her FRA is 67. I’m not sure but I believe she might still be able to file a restricted divorced spousal benefit application. Her income is about $30,000, so I am unsure if her monthly benefit will decrease the month she hits the $17,640 income limit or is that figured differently? Thanks, Sally

Hi Sally, Your sister could only file a restricted application for just divorced spousal benefits only if she was born prior to 1/2/1954, and even then she could only do so if she waited until her full retirement age (FRA). If she files for divorced spousal benefits before FRA, she’ll be deemed to also be applying for her own retirement benefits, and she’ll only be eligible for essentially the higher of those two benefit rates. Furthermore, if she files prior to FRA, her benefit rate will be reduced for age and her benefits would be subject to full or partial withholding based on Social Security’s earnings test.

The way Social Security applies the earnings test is to suspend a person’s entire benefit payment for as long as it takes to withhold $1 of benefits for each $2 that the person expects to earn in excess of the exempt amount. This year the exempt amount is $17,640, so if your sister files this year at 62 and expects to earn $30,000 in 2019, Social Security would withhold the first $6,180 (i.e. ($30,000 – $17,640) / 2) of her 2019 benefits before paying her anything. Best, Larry

Should I File And Suspend When My Wife Reaches Age 66?

HI Larry, I was born in 1950 and my wife in 1953. We are both working full time and neither of us has filed for our Social Security benefits. Before she turns 66 next September, should I file and suspend so at 66 she can file a restricted application for spousal benefit only while both our retirement benefits continue to grow at 8%, or must I be actively receiving my retirement benefit for her to receive her spousal benefit of my record? Parenthetically, 50% of my retirement benefit would be less than her retirement benefit were she to apply for that. Thank, Sal

Hi Sal, It wouldn’t help for you to file for and suspend your retirement benefits because your wife couldn’t be paid spousal benefits on your record while your benefits are suspended. This is due to the Bipartisan Budget Act of 2015. In other words, the only way your wife could receive spousal benefits is if you’re actually drawing your benefits. I can’t really give you any advice regarding your best strategy without additional information. You and your wife can use one of company’s two tools — Maximize My Social Security or MaxiFi Planner — to understand how to 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 Consider A One Time Bonus As Income To Raise My Medicare Premium?​​

Hi Larry, I was paid a bonus last year that put me over the $85,000 base for Medicare. Does Social Security consider that one time bonus as part of my income to raise my Medicare to over $300 a month? Thanks, Tim

Hi Tim, All of your income is considered when determining whether or not you must pay a higher than the standard amount for Part B Medicare premiums. However, in some cases Social Security can use a more recent tax year for their determination if your income has changed for certain reasons. I don’t know whether or not that may apply in your case, but you may want to contact Social Security to see if you could qualify for a lower premium rate. Best, Larry

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

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