Today’s column discusses whether early retirement benefits will reduce widow(er)’s benefits taken later, potential benefits for younger single parents, effects of earnings $1,000,000, effects of suspending a retirement benefit and income with a spousal benefit after FRA. 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.
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Ask Larry about Social Security here.
Will Social Security Retirement Benefits At 62 Reduce Later Survivor’s Benefits?
Hi Larry, If my wife draws her Social Security retirement benefits at 62, are her future widow’s benefits reduced by this or is it dependent on when she files for the survivor benefits? Thanks, Al
Hi Al, Your wife’s survivor benefits wouldn’t necessarily be reduced if she files for reduced retirement or spousal benefits at 62. Reductions for age of a survivor benefit are based on the survivor’s age, not if or when they applied for other benefits. So if a person doesn’t start drawing a survivor benefit until full retirement age or later, their survivor rate would not be reduced for age.
However, that doesn’t necessarily mean that it would be a good strategy for your wife to start drawing benefits at age 62. Her optimal strategy depends on a number of different variables. Best, Larry
Would I Qualify For Any Social Security Benefits As A Single Parent?
Hi Larry, I’m a 44 year old working single mom of a 5-year old child. We live with my mom. I have never collected child support. Is there any Social Security benefits that would be available to me? Thanks, Carla
Hi Carla, It doesn’t sound like it. You would have to be disabled in order to qualify for Social Security benefits based on your own work record prior to age 62, and the only way that you could currently be eligible for benefits on the record of a spouse or former spouse is if they are deceased or drawing Social Security benefits and your child qualifies for benefits on their record. Your child couldn’t qualify for Social Security benefits on a parent’s record unless the parent is either deceased or drawing Social Security benefits. Best, Larry
If I Earned A Million Dollars, Would Social Security Withhold Half Of That Amount From My Benefits?
Hi Larry, I am thinking of retiring when I am 63 and collecting Social Security benefits so that I can write full-time. I understand that, if I do, and I make money on my writing, Social Security will withhold $1 for every $2 I would make over $17,040 this year with higher exempt amounts in future years. I know this may be unlikely, but what if the wonderful dream comes true and, for my novel, I get a million dollar advance. Does this mean that Social Security would withhold $491,480? Thanks, Jesse
Hi Jesse, For earnings test purposes, Social Security only withholds up to the full amount of your yearly Social Security benefits. They can’t touch your actual earnings. If you did earn a million dollars in some year prior to reaching your full retirement age (FRA), it would simply mean that you wouldn’t be eligible to receive any Social Security benefits for that year. Your benefit payments could then resume the following year as long as you didn’t earn over the earnings test exempt amount in that year.
Before filing, 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
Could You Please Clarify Our Options?
Hi Larry, I am 67 and working. My wife just is retired and turned 66 in January. We thought I would file and suspend my retirement benefits so my wife could collect spousal benefits. When we went to Social Security office, they declined her spousal benefits and told us under the new law that she would not be eligible for spousal benefits if my retirement benefit is suspended. I could swear I was told different before. Could you please clarify if they are trying to blow us off. Thanks, Jake
Hi Jake, They’re not blowing you off. Here’s the story: since your wife was born prior to 1/2/1954, she could qualify for spousal benefits only without also filing for her own retirement benefits starting with the month she reaches full retirement age (FRA), but only if you’ve filed for your retirement benefits. However, if you file for and suspend your retirement benefits, your wife’s spousal benefits would also be suspended for as long as your retirement benefits are suspended. So there would be no way for your wife to draw spousal benefits while you continue to earn delayed retirement credits (DRCs).
Your best strategy depends in part on whether or not your wife is eligible for retirement benefits on her own record, and if so the relative amounts of her retirement benefit rate versus your retirement benefit rate. Best, Larry
Will My Earnings Prior To My Retirement Date Affect Either My Wife’s Benefits Or My Spousal Benefits?
Hi Larry, This year my wife will turn 62 in October and will file for her early benefit at that time. I will retire in December of this year at 67. At that time, I plan on filing a restricted application for spousal benefits and allow my retirement benefit to grow till 70. Will the earnings I receive prior to my retirement date limit in any way the amount of my spousal benefit or my wife’s retirement benefit? Thanks, Sal
Hi Sal, Your 2019 earnings wouldn’t reduce either your spousal benefits or your wife’s retirement benefits because you have already reached your full retirement age (FRA).
The plan you have in mind sounds fine, but you wouldn’t want to wait beyond the first month that your wife claims her retirement benefits to claim spousal benefits. Your spousal benefit rate would be the same regardless of whether you start drawing at age 66 or 67 or anytime thereafter. Unless your wife was born on July 1st or 2nd, in which case she could qualify for benefits effective with July, it sounds like her earliest possible month of eligibility would be August. And, if she claims her benefits at that time you would almost certainly want to start your spousal benefits effective with the same month. Best, Larry
To learn more about your Social Security options, visit Economic Security Planning, Inc.