Today’s column addresses whether income after 62 is used to calculate benefit amounts, benefits for grandchildren, the effect on Social Security benefits of a survivor benefit based on a public pension, the effects of early filing on later Social Security survivor’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. 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.
Which Years of Income Will Social Security Use To Calculate My Retirement Benefit?
Hi Larry, I am 62 and plan to work until my full retirement age of 66 and 4 months. Will Social Security calculated my earnings thru 66 and 4 months to gather the highest salary that I have earned? I heard from a friend who seems very knowledgeable about all this that once you turn 62, no matter how much you make after 62, it is not included on the calculations for your monthly Social Security earnings. I asked him if he was really sure, even to the point of annoying him I think, and he kept insisting very stridently that it was true. I hope he is wrong since my earnings will probably be the highest between now and 66 and that is one of the reasons I hope to stay working until 66. My friend seems very sure of himself but is he actually correct? Thanks, Ted
Hi Ted, Despite his self-assurance and strident tone, your friend could not be more wrong.
There is no truth whatsoever to the rumor you heard from your insistent friend that earnings after age 62 can’t be used to calculate your Social Security benefit rate. In fact, your earnings can be used to calculate your Social Security retirement benefit rate regardless of your age at the time you had the earnings, even if you’re still working after you reach 100!
Your Social Security retirement benefit rate is based on an average of your highest 35 years of wage indexed earnings. Regardless of at what age you first apply for your benefits, your initial benefit rate will be based on your highest 35 years of wage indexed earnings through the year prior to your year of filing. If you continue working after that, your benefit rate can be recomputed if you earn more in a subsequent year than you did in one or more of your previous highest 35 years of wage indexed earnings.
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 The Fact That My Wife And I Are Raising Grandchildren Affect Our Benefits?
Hi Larry, I am 74 and my wife is 69 — both of us are receiving our Social Security benefits. We also have been raising our two grandchildren and I wonder if that affects benefits. Are we able to receive more benefits on their behalf? Thanks, Marc
Hi Marc, The fact that you’re raising grandchildren wouldn’t have any effect on your or your wife’s Social Security benefits. Grandchildren can qualify for Social Security child’s benefits on a grandparent’s record in some cases, but only if both of the grandchild’s natural parents are deceased or disabled, or if the grandchild is adopted by the grandparent. Best, Larry
If I Start Drawing Benefits And Return To Work, Would It Benefit Me To Stop Receiving Payments?
Hi Larry, I turn 65 on 12/3 this year. I am presently unemployed. If I start receiving Social Security next February and go back to work in May, would it benefit me to stop receiving benefits in June and restart after I stop work? Can I repay what was paid to me and receive a higher benefit when I reapply for benefits? Thanks, Bill
Hi Bill, There are too many variables involved to be able to give you a definitive answer to your question as to whether or not it would benefit you to stop receiving benefits In June 2020 if you go back to work. In any case, though, that’s not something that you could voluntarily opt to do. Once you start drawing reduced Social Security benefits prior to your full retirement age (FRA), you can’t voluntarily stop receiving them until you reach FRA. Your benefits could be involuntarily suspended before you reach FRA, however, if you return to work and earn more than what’s allowed under Social Security’s earnings test.
If you start receiving benefits next year and you earn more than the exempt amount for those reaching FRA in 2020 in the first 11 months of 2020, Social Security would need to withhold $1 of your benefits for each $3 that you earn in excess of that amount. There wouldn’t be any limit on the amount you could earn when you reach FRA, but you could voluntarily suspend your benefits at that point in order to accrue delayed retirement credits (DRC). You wouldn’t be allowed to voluntarily suspend your benefits prior to your FRA though.
If you file for benefits and then change your mind, you can withdraw your claim if you request withdrawal within 12 months of the month that you started drawing benefits. However, you would then have to repay any benefits that you had already been paid. Withdrawing your application would be like wiping the slate clean, and you could then reapply for benefits at a later date of your choosing. Best, Larry
Would There Be Any Offset Of My Social Security If I Get My Husband’s Pension?
Hi Larry, My husband has a federal employee pension and no Social Security. I have a teacher’s pension. If he dies before me, is there any offset from his pension and my Social Security? Thanks, Laurie
Hi Laurie, If you receive a civil service survivor pension based on your husband’s federal employment, it will not affect your Social Security benefits. Your own teacher’s pension might affect your benefits though, both through the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) if you didn’t pay Social Security tax on the income that pension is based on. Best, Larry
Would My Wife’s Survivor Rate Be Lower If She Starts Drawing Her Own Benefits At Age 62?
Hi Larry, If my wife claims at 62, how will that affect her benefit when I die? I will not start my benefit for another two years at 70. Will it be smaller overall because she started at 62? Thanks, Gary
Hi Gary, Regardless of when your wife starts drawing her own retirement benefits, she could receive up to your full benefit amount as a survivor if you die before her. She wouldn’t get both her own benefit rate and yours, however, just the higher of the two.
For example, say Joni files for her benefits at 62. Joni’s full retirement age rate would be $1,500, but she instead receives a reduced rate of $1,100 in return for starting her benefits early. Joni’s husband Bill waits until 70 to apply for his benefits, and so he receives an increased rate of $2,640 instead of his full retirement age rate of $2,000. If Bill dies before Joni and if Joni is at least full retirement age (FRA) at the time, she becomes entitled to her full survivor benefits, she would receive a combined benefit rate equal to Bill’s full benefit amount of $2,640. Technically, Joni would continue to receive her own $1,100 retirement benefit plus a survivor amount of $1,540 from Bill’s record, her excess widow’s benefit, but the total would be based on Bill’s full benefit amount.
Furthermore, if Joni in the example above starts drawing her benefits before Bill reaches age 70, Bill could potentially file for spousal benefits only on Joni’s record if he’s at least FRA and if he was born prior to 1/2/1954. In that case Bill could start out drawing a spousal benefit of $750 (i.e. 50% of Joni’s full retirement age rate) and then switch to his own higher retirement benefits at 70. Best, Larry
To learn more about your Social Security options, visit Economic Security Planning, Inc.