Today’s column addresses whether and when benefits can increase due to continued income, whether savings invoke the earnings penalty, when the earnings test will be applied, filing and suspending versus restricting an application and eligibility for divorced spousal benefits. 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.
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Ask Larry about Social Security:
Will Our Social Security Benefits Increase Based On Our 2019 Tax Return?
Hi Larry, My husband will be 70 in April 2020 and plans to start his Social Security retirement benefits starting January 2020. He just talk to SSA and they gave him an estimate which is only $1 less than your program when I input his earnings through 2018. This amount of course does not include his earnings for 2019. When I enter in your program that his last year of earnings will be 2019, I have of course little bit higher amount. Will SSA increase his benefits after they receive our 2019 income tax return? Thank you very much for your program, it is worth every penny and it really gave us the best options for us. Thanks, Anna
Hi Anna, Thank you for the endorsement. Yes, if your husband’s 2019 earnings are high enough to be among his 35 highest years of wage-indexed earnings, his benefit rate will be adjusted to include credit for the 2019 earnings starting with his benefits effective January 2020. That process should be done automatically by Social Security sometime toward the latter part of 2020, and if the 2019 earnings do increase your husband’s benefit rate, they will pay him any back benefits due. If he wants to speed up the process, he could submit proof of his 2019 earnings (e.g. W-2 form(s) for wages or Schedule SE from his tax return for self-employment) to Social Security and request a manual recomputation. Best, Larry
Will I Be Able To Retain My Savings And Draw Out The Interest To Supplement Social Security Benefits?
Hi Larry, I have 401K and a pension that will be available after I retire. Will I be able to keep this in savings and draw from just the interest monthly to supplement what I get from Social Security? Thanks, Jason
Hi Jason, Yes. Pension income and 401k withdrawals are not considered as earned income for purposes of Social Security’s earnings test, so they wouldn’t interfere with your ability to draw your Social Security benefits regardless of your age. Nor is there any limit on the amount of savings and assets you can have and still be able to receive Social Security benefits. 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
Can I Start Drawing My Benefits Before Age 66 With No Reduction In My Benefit Rate And Still Work Full Time?
Hi Larry, I will be turning 66 in 7/2020. If I start collecting my Social Security retirement benefit in 1/2020 or 2/2020, will I be able to collect my entire Social Security benefit and also work full time without getting a reduction in my Social Security retirement benefit? Thanks, Seth
Hi Seth, First of all, your full retirement age (FRA) benefit rate, which is equal to your Primary Insurance Amount (PIA), would be reduced by 5/9ths of 1% for each month that you start drawing your benefits prior to your FRA in 7/2020. And there is a limit on how much you could earn from January through June of 2020 without losing at least some of your benefits for those months to the Social Security earnings test. In 2019, the exempt amount that a person can earn in the months prior to the month they reach full retirement age (FRA) without losing any benefits is $46,920, but the exempt amount is adjusted annually. Best, Larry
Is There Such A Thing As A “File And Restrict” Option Available To Me?
Hi Larry, I am going to be 66 this year and have two dependent children under 18. My spouse is only 54. My oldest is diagnosed with ADHD. Is a file and restrict option available even though my wife is quite a distance from retirement? Her income is substantially greater than mine. Thanks, Lewis
Hi Lewis, I’m not sure what you are referring to by “file and restrict.” You could file for and suspend your retirement benefits, but your wife and children could not be paid benefits from your record while your retirement benefits are suspended. So, there is likely no reason for you to consider filing for and suspending your retirement benefits.
Filing a restricted application most commonly occurs in cases where a person files just for spousal or survivor benefits only while waiting until later claim their own retirement benefits. It doesn’t sound like that would work in your case because your wife would have to be drawing her retirement benefits in order for you to potentially qualify for spousal benefits, and unless your wife is disabled, the earliest that she could claim benefits on her record is at 62.
The soonest that your wife and children could potentially draw benefits on your record would be when you file for and start drawing your benefits. Your wife could potentially qualify for child-in-care spousal benefits regardless of her age, provided that she has a child in her care who is either under 16 or disabled according to Social Security’s definition. Best, Larry
Is It True That My Friend Can Receive Divorced Spousal Benefits Even Though She Was Married Less Than 10 Years?
Hi Larry, I have a friend who was married less than seven years before divorcing. They had a child together. She is just over 62 and says she is collecting on her ex’s Social Security record until she turns 70, when she will collect her Social Security retirement benefit based on her own record. The child is over 18 and she is not collecting due to disability. She claims the 10 year rule is for those who had no children. Is this true? Thanks, Melody
Hi Melody, If your friend was married for less than 10 years, the only way that she could legally be drawing benefits on her ex-husband’s record is as a surviving divorced mother. To qualify for surviving divorced mother’s benefits, you must have an eligible child of the deceased worker in your care, and the child must be a) entitled to benefits on the deceased worker’s record and b) either under age 16 or disabled based on Social Security’s definition.
Therefore, based on your description of your friend’s circumstances, her ex would have to be deceased and her child would have to be drawing benefits as a disabled adult child and be in your friend’s care in order for her to qualify for benefits on her ex-spouse’s record. Best, Larry
To learn more about your Social Security options, visit Economic Security Planning, Inc.