Ask Larry: Should My Wife File And Suspend To Restrict Her Application To Spousal Benefits Only?

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Social Security may be one of your largest assets. What and when you collect will make a huge difference to your lifetime benefits.

Today’s column addresses whether you really need to file and suspend before restricting an application to spousal benefits only, questions about Medicaid on a Social Security application, when married couples can file, counting self-employment income and indexing factors used to determine 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.

Should My Wife File And Suspend To Restrict Her Application To Spousal Benefits Only? ​​

Hi Larry, My wife is about to turn 66 so we're coming up to the wire. I bought your book, Get What's Yours and read your columns so I filed for and suspended my retirement benefit before 4/29/2016. I was born in 6/1949 and now get my increased age 70 retirement benefit amount. My wife was born in 11/1953 so she falls into that sweet spot before 1954.

We're not sure if this is the right way to go but as of now, our plan is to have her file for and suspend her retirement benefit before filing for her spousal. We believe that this way, she can increase her retirement benefit until 70 just as I did.

But now, we're getting nervous and aren't sure if this is the right thing to do. Should she really do this or would doing so be bad for us? We hear different things and don't know what to believe.

And even if suspending her retirement benefit is the right thing to do, did she have to tell Social Security that she wanted to suspend it until 70 before April 2016? Or should she not file for her retirement benefit and suspend it at all before filing for her spousal benefit? Thanks, Joseph

Joseph,  No! — absolutely do not have her file and suspend. That's the last thing she should do. She needs to file just for her spousal benefit only and simply delay filing for her retirement benefit till 70.

What you're trying to achieve is a restricted application, which means she'll be filing for only one benefit, her spousal benefit, when she's eligible to file for another, her retirement benefit, as well. So also filing for her retirement benefit when she files for her spousal benefit is by definition not a restricted application.

Instead she'll simply file for only her spousal benefit while delaying filing for her retirement benefit. Incidentally, since you turned 70 before she reached her FRA, the earliest she can file a restricted application, you didn't need to file for and suspend your retirement benefit. You also could have simply delaying filing for it by doing nothing. You did preserve certain options and didn't incur penalties by doing so however.

On her application at the bottom she needs to write

I'm restricting my application to spousal benefits on the work record of my husband. I will not file for receipt of my own retirement benefit until the month I turn 70.

This way, her intent will be documented in case there are any problems later. Note that she'll need to actively file for her retirement benefit when she turns 70.

Best, Larry


Why Does The Social Security Retirement Application Ask If I Have Medicaid?​​

Hi Larry, The Social Security Retirement application asks whether or not I have Medicaid. Would that cause my benefit amount to be lower yet? I am currently on a Medicare Savings Program which I understand is funded by Medicaid. However, on the My Texas Benefits page, it clearly states that I have been denied for Medicaid. I worry that I this, somehow, will trigger my small benefit amount to decrease again. Thanks, Cindy

Hi Cindy, I think the only reason that the online applications ask about Medicaid is because Medicaid eligibility could effect a person's Medicare options. In some cases states pay a person's Part B Medicare premiums when the person is eligible for Medicaid, and when a person is on Medicaid they can sometimes be enrolled in Part B of Medicare outside of the normal enrollment periods.

In any case Medicaid eligibility (or lack thereof) has no bearing on a person's Social Security retirement benefit rate, so you needn't be concerned. If you haven't already done so, 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 My Wife Apply Before Me?​​

Hi Larry, I was born in 12/1953. I retired in July and will apply for my Social Security retirement benefits in December when I turn 66. My wife was born in 4/1954 and was planning on retiring in 9/2019 and applying for her retirement benefits then. I've been told that I need to apply at the same time as my wife but I don't know if this is true. If it is not true, can she apply and September while I wait until December? Thanks, Curt

Hi Curt, Yes your wife could file to begin benefits in September and you could file to start your benefits in December. Your and your wife's months of election to start benefits don't have to coincide, although if you're planning to file a restricted application for just spousal benefits only while delaying your own retirement benefits, you couldn't do so prior to the month you reach full retirement age (FRA). Your wife must be drawing benefits on her record in order for you to claim spousal benefits, but it's fine if she decides to start drawing before you. Best, Larry


Can I Base My Income On Net Earnings For The Year?

Hi Larry, If I take early retirement at 62, can I work in my self-employed job and base my income on net income for the year instead of monthly for Social Security purposes? Or do I need to use the gross? By the time I take deductions, I'll be around $18,000 to $20,000 net. Thanks, Bill

Hi Bill, For Social Security earnings test purposes, your countable earnings is your gross wages or net earnings from self-employment (NESE). Therefore, if you're self-employed only, Social Security would count your net self-employment earnings for the calendar year. The 2019 earnings test exempt amount for people age 62 is $17,640, so if your NESE is between $18,000 - $20,000 in 2019, Social Security would need to withhold $1 of your benefits for each $2 that your NESE exceeds $17,640. Best, Larry


Which Indexing Factors Are Used To Calculate A Person's Benefit Rate?​​

Hi Larry, Let's say a person quits working sometime before their 62nd birthday. At 62, they file for Social Security benefits. The monthly benefit can be calculated using that year's form 05-10070 and Index Factors. If a person decides not to file, until age 64, does that original 'retirement age' (Step 6) get recalculated using current year index factors, or is that original number the one that is used for the adjusted 64 year old's benefit amount? Thanks, Sally

Hi Sally, Regardless of at what age a person applies for benefits, the indexing factors used for calculating their Social Security retirement benefit rate are based on the year they reach age 62. The person then receives any subsequent cost of living increases (COLA) announced by Social Security, whether or not they've started drawing benefits. In other words, after a person turns age 62 their benefits are adjusted to keep pace with cost of living increases rather than average wage increases. Best, Larry

To learn more about your Social Security options, visit Economic Security Planning, Inc.

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Social Security may be one of your largest assets. What and when you collect will make a huge difference to your lifetime benefits.

Today’s column addresses whether you really need to file and suspend before restricting an application to spousal benefits only, questions about Medicaid on a Social Security application, when married couples can file, counting self-employment income and indexing factors used to determine 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.

Should My Wife File And Suspend To Restrict Her Application To Spousal Benefits Only? ​​

Hi Larry, My wife is about to turn 66 so we're coming up to the wire. I bought your book, Get What's Yours and read your columns so I filed for and suspended my retirement benefit before 4/29/2016. I was born in 6/1949 and now get my increased age 70 retirement benefit amount. My wife was born in 11/1953 so she falls into that sweet spot before 1954.

We're not sure if this is the right way to go but as of now, our plan is to have her file for and suspend her retirement benefit before filing for her spousal. We believe that this way, she can increase her retirement benefit until 70 just as I did.

But now, we're getting nervous and aren't sure if this is the right thing to do. Should she really do this or would doing so be bad for us? We hear different things and don't know what to believe.

And even if suspending her retirement benefit is the right thing to do, did she have to tell Social Security that she wanted to suspend it until 70 before April 2016? Or should she not file for her retirement benefit and suspend it at all before filing for her spousal benefit? Thanks, Joseph

Joseph,  No! — absolutely do not have her file and suspend. That's the last thing she should do. She needs to file just for her spousal benefit only and simply delay filing for her retirement benefit till 70.

What you're trying to achieve is a restricted application, which means she'll be filing for only one benefit, her spousal benefit, when she's eligible to file for another, her retirement benefit, as well. So also filing for her retirement benefit when she files for her spousal benefit is by definition not a restricted application.

Instead she'll simply file for only her spousal benefit while delaying filing for her retirement benefit. Incidentally, since you turned 70 before she reached her FRA, the earliest she can file a restricted application, you didn't need to file for and suspend your retirement benefit. You also could have simply delaying filing for it by doing nothing. You did preserve certain options and didn't incur penalties by doing so however.

On her application at the bottom she needs to write

I'm restricting my application to spousal benefits on the work record of my husband. I will not file for receipt of my own retirement benefit until the month I turn 70.

This way, her intent will be documented in case there are any problems later. Note that she'll need to actively file for her retirement benefit when she turns 70.

Best, Larry


Why Does The Social Security Retirement Application Ask If I Have Medicaid?​​

Hi Larry, The Social Security Retirement application asks whether or not I have Medicaid. Would that cause my benefit amount to be lower yet? I am currently on a Medicare Savings Program which I understand is funded by Medicaid. However, on the My Texas Benefits page, it clearly states that I have been denied for Medicaid. I worry that I this, somehow, will trigger my small benefit amount to decrease again. Thanks, Cindy

Hi Cindy, I think the only reason that the online applications ask about Medicaid is because Medicaid eligibility could effect a person's Medicare options. In some cases states pay a person's Part B Medicare premiums when the person is eligible for Medicaid, and when a person is on Medicaid they can sometimes be enrolled in Part B of Medicare outside of the normal enrollment periods.

In any case Medicaid eligibility (or lack thereof) has no bearing on a person's Social Security retirement benefit rate, so you needn't be concerned. If you haven't already done so, 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 My Wife Apply Before Me?​​

Hi Larry, I was born in 12/1953. I retired in July and will apply for my Social Security retirement benefits in December when I turn 66. My wife was born in 4/1954 and was planning on retiring in 9/2019 and applying for her retirement benefits then. I've been told that I need to apply at the same time as my wife but I don't know if this is true. If it is not true, can she apply and September while I wait until December? Thanks, Curt

Hi Curt, Yes your wife could file to begin benefits in September and you could file to start your benefits in December. Your and your wife's months of election to start benefits don't have to coincide, although if you're planning to file a restricted application for just spousal benefits only while delaying your own retirement benefits, you couldn't do so prior to the month you reach full retirement age (FRA). Your wife must be drawing benefits on her record in order for you to claim spousal benefits, but it's fine if she decides to start drawing before you. Best, Larry


Can I Base My Income On Net Earnings For The Year?

Hi Larry, If I take early retirement at 62, can I work in my self-employed job and base my income on net income for the year instead of monthly for Social Security purposes? Or do I need to use the gross? By the time I take deductions, I'll be around $18,000 to $20,000 net. Thanks, Bill

Hi Bill, For Social Security earnings test purposes, your countable earnings is your gross wages or net earnings from self-employment (NESE). Therefore, if you're self-employed only, Social Security would count your net self-employment earnings for the calendar year. The 2019 earnings test exempt amount for people age 62 is $17,640, so if your NESE is between $18,000 - $20,000 in 2019, Social Security would need to withhold $1 of your benefits for each $2 that your NESE exceeds $17,640. Best, Larry


Which Indexing Factors Are Used To Calculate A Person's Benefit Rate?​​

Hi Larry, Let's say a person quits working sometime before their 62nd birthday. At 62, they file for Social Security benefits. The monthly benefit can be calculated using that year's form 05-10070 and Index Factors. If a person decides not to file, until age 64, does that original 'retirement age' (Step 6) get recalculated using current year index factors, or is that original number the one that is used for the adjusted 64 year old's benefit amount? Thanks, Sally

Hi Sally, Regardless of at what age a person applies for benefits, the indexing factors used for calculating their Social Security retirement benefit rate are based on the year they reach age 62. The person then receives any subsequent cost of living increases (COLA) announced by Social Security, whether or not they've started drawing benefits. In other words, after a person turns age 62 their benefits are adjusted to keep pace with cost of living increases rather than average wage increases. Best, Larry

To learn more about your Social Security options, visit Economic Security Planning, Inc.

Follow me on Twitter or LinkedIn. Check out my website.

I am a professor of economics at Boston University, a Fellow of the American Academy, a Research Associate of the NBER, and President of Economic Security Planning, Inc....