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Today’s column addresses how years with no income can affect benefit amounts and estimates, the calculation of spousal benefits, effects on later benefits of filing early, public pensions and the WEP and GPO and sequencing survivor and retirement 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.
How Will $0 Income For 8 Years Affect My Social Security Retirement Benefit?
Hi Larry, I elected to take spousal benefit at 66 and continue to delay receiving retirement benefits on my record. The last benefit estimate I had showed me receiving $2,282 at 66. Doing the math: $2,282 * 1.32 so I would receive $3,012 + COLAs. Is this correct? How does $0 income for eight years effect my benefit? I can’t get a benefit estimate from Social Security online because I receive spousal benefits. Will Social Security give me the benefit amount over the phone or at a SS office? Thanks, Sarah
Hi Sarah, Yes, your math appears to be correct. Having no earnings for eight years won’t lower your benefit rate as long as future projected earnings weren’t used in calculating your previous estimate. The Social Security statements periodically mailed out by Social Security do often include assumed future earnings in some of their calculations, so if that’s what you’re basing your estimate on you may want to double check. But it’s important to understand that your benefit isn’t being lowered due to the years with no income. Previous estimates based on continued income may now be inaccurate, but there is no penalty or reduction due to having years with no income before filing. Best, Larry
Would I Get Half Of My Husband’s FRA Rate If I File Now?
Hi Larry, My husband took early Social Security retirement benefits at 62. His retirement benefit estimate at his FRA at the time in 2017 was $2,254 but of course he gets much less because he chose to take it at 62. I was born in 1955. My own Social Security retirement benefit at my FRA would be $1,026. If I would apply for spousal benefits now, what would I receive? Also, would the cost of living increases be used to calculate my spousal benefit, meaning would my husbands FRA amount of $2,254 be higher when determining my spousal benefit? Thanks, Mindy
Hi Mindy, Since you were born after 1/1/1954, you will be deemed to be filing for both Social Security retirement and spousal benefits when you file for either of those benefits. You’ll basically be eligible for the higher of the two benefit rates, and your rate will be reduced for age if you start drawing prior to your full retirement age (FRA).
If you wait until FRA to start drawing, you would receive the higher of a) your full retirement age rate (i.e. primary insurance amount, or PIA), or b) 50% of your husband’s full retirement age rate (his PIA). If you file now instead, your benefit rate would be reduced. The unreduced spousal benefit calculation would be based on 50% of your husband’s PIA at the time you file for your spousal benefits, so it would include any cost of living allowances (COLAs) that he’s received.
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
If My Wife Files For Reduced Benefits On Her Record, Will That Reduction Also Apply To Her Spousal Benefits?
Hi Larry, My wife will be 62 in a few months and I will be 64. I am the higher earner of the two by quite a bit. If she starts drawing at, 62 she will get somewhere around 70% of her full retirement benefits. I don’t plan on drawing until age 70. If she does draw at age 62, when I start drawing is she limited to somewhere around 70% of what she normally would get since she started early? Also, when I get to full retirement age, can I draw my spousal benefit on her earnings until I reach 70 when I’ll draw my own retirement benefit? Thanks, Greg
Hi Greg, If your wife was born in 1957 and starts drawing her Social Security retirement benefits the month she reaches 62, she would receive 72.5% of her full retirement age rate. The 27.5% reduction in her retirement rate would continue even if she later qualifies for additional spousal benefits from your record. Any reduction applicable to the additional spousal rate would be calculated based on her age at the time she becomes eligible for the spousal benefit.
Since you were born after 1/1/1954, you could never file just for spousal benefits only without being deemed to have also filed for your own retirement benefits at the same time. In other words, filing for a spousal benefit while allowing your own benefit rate to grow until age 70 won’t be an option for you. Best, Larry
What Do We Do?
HI Larry, My wife is receiving a teacher’s pension and worked her last day with a district which paid SSA tax in 2004. We are over 67 and applied for benefits in February. Can she be eligible for spousal benefits from my work record as well as receive her TRS pension? SSA says the GPO does not apply to her, but that the WEP reduces her benefit so she will receive a small Social Security retirement benefit. We want her spousal benefits, not her personal work record benefits. What do we do? Thanks, Tom
Hi Tom, Since your wife was born prior to 1/2/1954, she would have the option of filing just for spousal benefits without filing for her own Social Security retirement benefits. It sounds like her spousal benefits won’t be reduced due to the Government Pension Offset (GPO) provision provided that her last day of employment under her TRS pension plan was covered by Social Security and was before 7/1/2004. However, you must be drawing your retirement benefits in order for your wife to qualify for spousal benefits.
Your wife wouldn’t actually receive a higher benefit rate if she files only for spousal benefits, though, as opposed to filing for both spousal benefits and her own Social Security retirement benefits. If she files for both benefits, she’ll receive the higher of the two rates, and that’s true even if the Windfall Elimination Provision (WEP) reduces her retirement benefit rate. So the only way that your wife would likely benefit from not filing for her retirement benefits at the same time she files for spousal benefits is if her retirement rate would be higher at age 70 than her spousal rate. Best, Larry
Should I File On My Wife’s Record Or Just Take Mine Now?
Hi Larry, I am tuning 66 next week and I just filed for my Social Security retirement benefit. I am a widower for many years but I just found out I could have been receiving a survivor’s benefit based on my wife’s account. My retirement benefit is $1,250 per month. Hers would have been about $800 per month. I’m confused about whether I should I take the widower’s benefit until 70 or just take mine now. Thanks, Alvin
Hi Alvin, It sounds like you would probably be better off in the long run if you file just for widower’s benefits now and delay filing for your own retirement benefits until 70. If your own retirement benefit amount at full retirement age (FRA) would be $1,250, it would grow to roughly $1,650 if you wait until 70 to start drawing it. However, if you’ve already filed for your own benefits, you’ll need to withdraw your application and instead file a claim for widower’s benefits only. Best, Larry
To learn more about your Social Security options, visit Economic Security Planning, Inc.