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Today’s column examines spousal benefit rates if the other spouse filed for early reduced retirement benefits, who can still file restricted applications and when, spousal benefits before retirement benefits, widow(er)’s benefits after child-in-care benefits and the earnings test. 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.
See more Ask Larry answers here.
Ask Larry about Social Security:
Are Social Security Spousal Benefits Based On Reduced Retirement Benefits?
Hi Larry, Are spousal benefits based on the other spouse’s benefit amount at FRA, or on the other spouse’s retirement benefit amount? My husband started collecting Social Security retirement benefits when he was 62. I plan to keep working and delay filing for my own retirement benefit until 70. My retired husband won’t be due any spousal benefit based on my Social Security account at my FRA, because his current benefit is more than 50% of what my benefit would be at FRA. However, I am entering my highest earning years and plan to delay collecting, so my benefit at 70 will be quite a lot higher. If my husband claims spousal benefit when I reach 70, would it be calculated based on what I was due at FRA, which means he’ll get nothing? Or would it be based on the increased amount I will be getting at 70, which will get him something? Thanks, Betty
Hi Betty, Unreduced spousal benefits are based on 50% of their spouse’s full retirement age benefit rate, which is otherwise known as their primary insurance amount (PIA). In order for your husband to potentially qualify for additional spousal benefits from your record, your PIA would have to be more than twice as much as his PIA. Note that your husband’s PIA would be roughly 25% more than the reduced rate he’s now receiving if he started drawing benefits at age 62. So your PIA would need to be a lot more than twice as much as his reduced benefit rate in order for your husband to potentially qualify for spousal benefits.
For example, say Frank files for his benefits at age 62. Frank’s PIA is $1,500, but his age 62 rate is $1,125. Frank’s wife’s PIA is $2,500, but she waits until age 70 to start drawing her benefits and thus receives a monthly rate of $3,300. Even though Frank’s wife in this case would be drawing almost 3 times as much as him (i.e. $3,300 vs. $1,125), he would not qualify for spousal benefits because his PIA of $1,500 is more than 50% of his wife’s $2,500 PIA. Best, Larry
Are Restricted Applications Going Away?
Hi Larry, Are restricted application going away? Also, I have made more than my wife. We are both turning 66 this year. Also, can she file for her retirement benefit to allow me to take a spousal benefit while I wait to file at 70 for my own retirement benefit? Thanks, Tom
Hi Tom, Restricted applications are still possible for some people but not for others. For example, people born prior to 1/2/1954 can still file a restricted application for spousal benefits only at their full retirement age (FRA) and allow their own retirement benefit rate to grow until 70. And regardless of a person’s birthdate, they could potentially file a restricted application for survivor’s benefits only while allowing their own retirement rate to grow until 70.
Since both you and your wife were born prior to 1/2/1954, one or the other of you could file for your retirement benefits in order to allow the other of you to file a restricted application for spousal benefits only starting at their FRA. Whether or not that’s your best strategy depends on a number of variables, however, so you may want to use one of my company’s two tools — Maximize My Social Security and 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 File For Spousal Benefits At Age 62 And Then Switch To My Own Benefits Later?
Hi Larry, Can I file for Social Security spousal benefits at 62 and then switch to my own Social Security retirement benefits at a later date without penalty or reduction at wife’s death or my full retirement age? Thanks, Mark
Hi Mark, Since you were born after 1/1/1954, you can’t restrict your application to spousal benefits only and instead you’ll be deemed to be filing for both spousal benefits and for retirement benefits on your own record whenever you file for either one. So if you file at 62, you’ll just receive essentially the higher of your own retirement benefit rate or your spousal rate, and your benefit rate will be reduced for age.
Regardless of when you start drawing benefits as a spouse or on your own record, though, it wouldn’t have any effect on the survivor rate that you could potentially receive on a deceased spouse’s record. In most cases, the surviving member of a couple receives the higher of their own retirement benefit rate or their spouse’s benefit rate. However, the benefit rate can be reduced for age if the survivor is not yet full retirement age when they start drawing survivor benefits. Best, Larry
Can My Mother Collect Benefits On My Father’s Record Until 70?
Hi Larry, My father passed away when I was 14 and my mother was 42 and my mother collected child-in-care benefits. My mother is now 64. Is she able to collect a Social Security widow’s benefit based on my father’s record until she is 70? Or has she forfeited that option since she was given money for four years raising me? Thanks, Matt
Hi Matt, I’m sorry for your loss. Potentially, your mother could receive a widower’s benefit based on your father’s record. And the fact that your mother previously received child-in-care benefits would have no bearing on her current benefit eligibility or benefit rate.
So assuming that your mother meets the requirements for widow’s benefits, she could file for reduced widow’s benefits now and let her own benefit rate grow until age 70.
However, if your mother’s own retirement benefit rate at 70 would be lower than her unreduced widow’s rate, it might be better to file for reduced retirement benefits first and then file for unreduced widow’s benefits at her full retirement age (FRA). But if your mother is still working, her benefits prior to FRA could be subject to full or partial withholding if she earns too much regardless of whether she files for reduced retirement or widow’s benefits.
One of my company’s two tools — Maximize My Social Security and MaxiFi Planner — could sort all of this out for your mother and help her determine her optimal strategy for claiming her benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were also built with extreme care. Best, Larry
How Much Can I Earn Before I Have To Pay Back Any Portion Of My Earnings?
Hi Larry, I started getting my Social Security retirement benefit at 62. I will turn 69 in November and I have gone back to work this year. How much I can earn before I have to pay back any portion of my benefits? Thanks, Will
Hi Will, Since you are now over your full retirement age (FRA) of 66, there is no limit on the amount that you could earn and still draw all of your Social Security benefits. Your earnings will still be subject to Social Security taxes, though, but it’s possible that your earnings could increase your future retirement benefit rate.
Your retirement benefit rate is based on your highest 35 years of wage-indexed earnings, so you could increase your benefit rate if you earn more in a year than the amount that you were credited with in one or more of the previous highest 35 years on which your current benefit rate was based. Best, Larry
To learn more about your Social Security options, visit Economic Security Planning, Inc.