Today’s column addresses questions about what it means to stop working for several years before applying for subsequent amounts of Social Security retirement benefits, whether spousal benefits automatically convert to retirement benefits at age 70, and how the proof of income may affect anticipated survivor benefits. Larry Kotlikoff is professor of economics at Boston University and founder and president of Economic Security Planning, Inc, which markets Maximize my social security and MaxiFi Planner.
See more of Ask Larry’s responses here.
Do you have your own questions about Social Security that you would like to answer? Ask Larry about Social Security here.
Will stopping paying Social Security at 59 reduce my benefit at 67 or 70?
Hi Larry, I retired last year at 59. If I no longer pay Social Security, will my benefit start to decrease each year until I turn 67 or older if I delay until 70? Thanks frank
Hello Frank, Your benefits will not be less because you stopped working several years before claiming, but if continuing to work would have increased them, that of course will not happen if you are no longer working.
Social Security retirement benefits are calculated based on an average of the highest 35 years of income indexed to wages covered by a person’s Social Security. And stopping work would not reduce or increase your future benefit rate. It would just mean that you couldn’t increase your rate by replacing previous lower income years with future higher income years.
The effect that work stoppage would have on your benefit rate, if any, depends on how much you earned in your previous 35 years of highest indexed earnings, and how much you would have been earning if you had not stopped working.
Regardless, however, if you wait until your full retirement age (FRA) to begin receiving your benefits, no age reduction will be applied to your benefit rate and you will be paid 100% of your primary insurance amount (PIA ). If you fall behind your FRA, you will earn Deferred Retirement Credits (DRC) at a rate of 8% per year or 2/3 of 1% per month.
You may want to consider using my company’s software: Maximize my social security or MaxiFi Planner – to do your Social Security planning. The software allows you to enter projected earnings for the future year, which would allow you to determine what difference, if any, returning to work would make in your future benefit rate. Social Security calculators provided by other companies or nonprofits can provide appropriate suggestions if they were constructed with extreme care. Better, Larry
Will my wife’s spousal benefits automatically change to her own benefits at age 70?
Hi Larry, Will my wife’s spousal benefits automatically change to full benefits at age 70 or does she need to contact social security ahead of time? Thanks Matt
Hi Matt, Your wife cannot receive her retirement benefits until she applies for them. The only way your wife could be collecting only spousal benefits is if a) she was born before 1/2/1954, b) she applied for spousal benefits at or later full retirement age (FRA), and c) she restricted your application for spousal benefits to exclude your own benefits from the scope of your application.
therefore, since your wife has apparently never applied for her own benefits, she cannot be paid those benefits unless and until she applies for them.
Social Security allows people to apply for benefits up to four months before the month they want to claim them, but you can also file up to six months after the month you want to start receiving your benefits if you are at least six years old. months over FRA when you apply. So if your wife wants to claim her benefits from the month she turns 70, she can apply at any time, from four months before that month to six months after that month. Better, Larry
Can I apply for survivors benefits at age 60 and still work?
Hi Larry, Can I apply for survivors benefits at age 60 and still work? Is there an income that I cannot exceed before Social Security deducts from the benefit amount? I was married for over 10 years before we got divorced and then he passed away. Thanks, Teri
Hi Teri, You can claim benefits as a divorced surviving spouse starting at age 60, but if you earn too much, your benefits will be subject to full or partial withholding until you reach full retirement age (FRA). If you claim benefits before FRA, Social Security will withhold $ 1 of your benefits for every $ 2 you earn over what’s called the exempt amount.
The 2021 earnings exempt amount for people who will not make it to FRA this year is $ 18,960. Therefore, whether or not you are paid any benefits before the FRA depends on how much you are earning.
Your best filing strategy might be to apply for reduced widow benefits early and then switch to your own record at 70, or apply for reduced retirement benefits on your own record early and then apply for unreduced widow benefits at full retirement age ( FRA). Typically, you’ll want to start earning the lowest profit first and then switch to the highest register when you reach your highest potential rate. Better, Larry