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Today’s column answers questions about when spousal benefits can become available, whether application dates affect the application of COLAs, whether a checklist could help with deciding when to file, the earnings test and survivor benefits. with 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.
Is My Husband Eligible For Spousal Benefits If I Don’t File?
Hi Larry, My husband is full retirement age and has not yet begun receiving any Social Security benefits. I will be 62 this fall and I do not plan to file for any benefits at that time. Is it possible for my husband to file a restricted application when I turn 62 and receive benefits as my spouse? Thanks, Carol
Hi Carol, You would have to be drawing your Social Security retirement benefits in order for your husband to be able to qualify for spousal benefits. If you file for benefits before your full retirement age and you work and earn more than the Social Security earnings test exempt amount, both your retirement benefits and your husband’s spousal benefits could be subject to full or partial withholding depending on how much you earn.
Your likely best overall strategy depends on your and your husband’s relative benefit rates among a number or other factors. 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.
Will I Get The COLA If I File In December?
Hi Larry, My husband turned 66 in 2018 and applied for his Social Security retirement benefits and I will turn 66 this December. Social Security gave me a December 31 appointment for me to apply for spousal benefits. Will I get the annual increase added to whatever amount they tell me I am getting? Is there any benefit in waiting until January to apply? Thanks, Shanna
Hi Shanna, If your first month of entitlement to benefits is December, your first payment in January would include the 2.8% cost of living allowance (COLA). So if you’re quoted a rate that doesn’t include the COLA, your actual payment amount should be higher than that. And, no, filing on January as opposed to December would make no difference for the application of the COLA. The actual date that you file your application is irrelevant with regard to COLAs. Best, Larry
Is There A Matrix Or Checklist Available To Help People Make The Right Claiming Decision?
Hi Larry, I’m trying to figure out when to take survivor’s benefits. Is there a matrix or checklist as a way of making sure they make the right decision? Thanks, Sally
Hi Sally, It would be virtually impossible to create a checklist like you’re referring to that would be reliable. Social Security is an extremely complex program, and no two people’s circumstances and options are exactly the same. As noted in other answers, you can use software that is designed to identify the optimal claiming strategy for people based on their unique set of circumstances, and numerous variables factor into that analysis.
If a person is currently receiving widow’s benefits and they’re under 70, it would be advantageous in many cases for them to claim their retirement benefits at 70 assuming that their own retirement benefit rate would be higher than their widow’s rate. As explained above, though, each person’s situation is different so there’s no one-size-fits-all answer. Best, Larry
Will My Wife Suffer A Penalty Due To Her Earnings If She Claims At Age 62?
Hi Larry, My wife and I are both 60. My benefit at FRA will be more than twice hers. We are considering having me wait until 70 to claim, and having her claim somewhat earlier; the problem is figuring out when.
There’s one wrinkle. She works as a part-time community college instructor, earning about $30,000 per year. However, in California those earnings are outside of the Social Security system, i.e. she pays into a teacher’s retirement system instead, and does not pay any Social Security tax. However, she is almost certain to receive no actual pension from the teacher’s retirement system. She is also likely to keep working after 62 in this role.
Will her work at the community college reduce her Social Security benefits? Would she suffer a benefits penalty due to her earnings if she claims at 62? Also, if she claims early, does that reduce permanently her spousal and possible survivor benefits to be received past age 70? Thanks, Matt
Hi Matt, If your wife gets either a pension based on her earnings outside of the Social Security system or some type of lump sum payment in lieu of a pension, her own Social Security retirement benefits could be subject to reduction due to the Windfall Elimination Provision (WEP). Furthermore, due to the Government Pension Offset (GPO) provision, any Social Security spousal or survivor benefits for which your wife may qualify could be subject to being offset by 2/3rds of the amount of her non-covered pension, or the prorated amount if she receives a lump sum in lieu of a pension. However, unless and until your wife actually receives a non-covered pension or lump sum, her work outside of the Social Security system wouldn’t affect her benefit rates.
But if your wife files for Social Security benefits prior to her full retirement age (FRA), her benefits could be partially or fully withheld due to the earnings test if she works and earns more than the Social Security earnings test exempt amount.
If your wife files for her own retirement benefits at 62, she’d keep any reduction for age that she takes for as long as both of you are living. If she later qualifies for additional spousal benefits on your record when you file, those benefits would only be reduced for age if she’s under FRA when she becomes eligible for the spousal benefits. Regardless of when she starts receiving retirement and/or spousal benefits, though, it wouldn’t affect her survivor rate. Her survivor benefit rate would be unreduced as long as she’s at least FRA when she starts drawing the survivor benefits. And if you wait until 70 to start drawing your benefits, she could get your increased rate as a survivor. She wouldn’t get your full rate plus her own, though, just the higher of the two rates. Best, Larry
Would My Drawing Divorced Survivor Benefits Have A Negative Impact On My Ex’s Widow?
Hi Larry, I went to the SSA office to apply for my benefits having just turned 62. The woman who helped me told me that I was eligible for divorced widow benefits which had never occurred to me. This would benefit me pretty significantly but I want to make sure that it does not have a negative impact on his wife at the time of his death. He and I were married for 13 years. He was married to his second wife for less than 10 years and they had a minor child at the time of his death. Thanks, Lori
Hi Lori, Your drawing surviving divorced spousal benefits would not adversely affect any benefits that your ex-husband’s widow or children could draw, so there’s no need for you to be concerned about that.
Depending on the relative amounts of your potential survivor benefits and your own retirement benefits, your best strategy may be to either file for reduced survivor benefits now or as soon as your earnings will permit at least some benefits to be paid, then switch to your own record at age 70, or to file for reduced retirement benefits now or as soon as your earnings will permit at least some benefits to be paid, then file for unreduced survivor benefits at your full retirement age (FRA). Normally, you would want to start out drawing the lower benefit first and then switch to the higher record when it reaches its highest potential rate. Best, Larry
To learn more about your Social Security options, visit Economic Security Planning, Inc.