Ask Larry: Will Retirement Benefits At 63 Greatly Reduce My Wife's Spousal Benefit Later?

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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 how early retirement benefits can affect later spousal benefits, survivor's benefits before retirement benefits, the rate of reduction due to taking benefits early, the application of delayed retirement credits and the monthly versus annual earnings test. 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.

See more Ask Larry answers here.

Ask Larry about Social Security here.

Will Retirement Benefits At 63 Greatly Reduce My Wife's Spousal Benefit Later?​​

Hi Larry, My wife is 63. I am 64. I plan on taking my Social Security retirement benefit at full retirement age. My benefit is substantially higher than my wife's. If she collects her retirement benefit at 63, will it substantially reduce her spousal benefit when I start collecting at my full retirement age? Thanks, Jim

Hi Jim, I don't know what you'd consider to be substantial, but filing at age 63 would reduce your wife's benefit rate even if she later qualifies for additional spousal benefits on your record. And if she files for her spousal benefit at your FRA before she reaches her own FRA, it will be further reduced.

I should also mention that if you start drawing your benefits at FRA you will be limiting both your benefit rate and your wife's potential survivor rate as a widow to no more than the amount of your Primary Insurance Amount (PIA), which is equal to your full retirement age (FRA) retirement benefit amount. Before applying for any benefits, you and your 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 Draw My Widow's Benefit At 66 And Switch To My Own Retirement Benefit At 70?​​

Hi Larry, My husband passed away in July of 2013. He was 62 and had started receiving disability about six months before he died. I have been working full time. I will reach my FRA in December. I plan on applying for widows benefit to start then. From what I have read, I can get a widow's benefit equal to my husbands full retirement benefit when I turn 66. I plan on continuing to work for a while yet. If I restrict my application to my widow's benefit only, can I switch to my retirement benefit at 70? Thanks, Wendy

Hi Wendy, I'm sorry for your loss. Yes, you can start drawing widow's benefits at your full retirement age (FRA) and then switch to your own retirement benefit at 70 if your own benefit rate is higher than your widow's rate at that time. You can draw benefits starting with the month you reach FRA regardless of how much you earn. But if your earnings before FRA would be low enough to permit you to be paid benefits for months prior to FRA, it could be better to claim benefits early. Best, Larry

Is It Correct That If A Person Files For Their Retirement Benefits At 62, Any Subsequent Spousal Benefits Would Also Be Paid At Their Age 62 Rate?

Hi Larry, Is it true that if a spouse starts her own retirement benefit at 62 at a reduced rate but her husband who is older waits to claim his retirement benefit until she reaches full retirement age, the wife's spousal benefits will still be reduced to the qualifying percentage calculated at the time she first began her retirement benefit at 62. Is that correct? Thanks, Fred

Hi Fred, That's not correct. In the scenario you present the spouse would retain her own retirement benefits at the same reduced rate, but any additional spousal benefits would be unreduced.

For example, say Bill files for his Social Security retirement benefits this year at age 62. Bill's full retirement age rate, or primary insurance amount (PIA), would be $800, but his reduced age 62 rate is $580. Bill's wife files for her Social Security retirement benefits when Bill reaches his full retirement age (FRA) of 66.5, and her PIA is $2,000. Bill's spousal benefit amount would be calculated by subtracting his PIA from 50% of his wife's PIA, which in this example would be $200 (i.e. $2,000 / 2 – $800). No reduction would be applicable to the spousal benefit since that benefit didn't start until Bill's FRA. Bill's unreduced spousal benefit would then be added to his reduced retirement benefit to give him a combined monthly benefit of $780 (i.e. $580 + $200). Best, Larry


Am I Wrong In Thinking That I Should Receive Delayed Retirement Credits?

Hi Larry, I was born in July of 1949. I filed and suspended my Social Security benefits. I was told at the time that I filed that I would get 8% increase of my benefits each year that I suspended them and when I claim for the suspension payments benefits when paid in back credits the 8% will be figured in. My local Social Security office said there would be no 8% increase and that I would only get the amount that was in place when I filed back in 2015. Am I wrong in thinking that the 8% would apply? Thanks, Jerry

Hi Jerry, If you filed for and suspended your Social Security retirement benefits at your full retirement age (FRA) of 66 and you don't draw benefits for any months prior to age 70, your benefit rate will include a 32% delayed retirement credit (DRCs). That's based on the monthly DRC rate of 2/3rds of 1%, or 8% per year. By the way, a person can earn DRCs whether they file for and suspend their benefits or if they simply delay applying for benefits.

The only way that you would not receive DRCs is if you chose to reinstate your benefits retroactive to your FRA, in which case you'd be paid your retroactive benefits in a lump sum. You would be allowed to do that if you suspended your benefits prior to 4/29/2016, although I'm not suggesting that you should do so. Best, Larry


If I Claim Benefits Now, Will The Earnings Limit Apply Only To My Earnings For The Rest Of The Year?

Hi Larry, I turned 65 in April. If I claim my Social Security retirement benefits now, will the earning limit be for the rest of the year, or will all of 2019 be counted. Also, by continuing to work, what can I expect my benefit amount of $1,707 to become as I continue to work at an anticipated rate of about $30,000 per year until I am 70. So confusing. Thanks, Martin

Hi Martin, Social Security's annual earnings test counts your entire calendar year earnings, regardless of what month you start drawing benefits. So if you claim benefits now and you end up earning more than $17,640 for the calendar year of 2019, you'll likely lose $1 of your 2019 benefits for each $2 that your earnings exceed the $17,640 limit.

There is, however, an alternate monthly earnings test that can be used instead of the annual earnings test in the first year that you claim benefits. Using that test, regardless of how much you've earned in the months prior to the first month that you claim benefits, you could still be paid all of your benefits for any months of 2019 in which your earnings don't exceed $1,470.

How much your additional years of earnings would increase your benefit rate, if at all, would depend on how much you earned in past years. Social Security uses an average of your highest 35 years of wage-indexed earnings to calculate your retirement benefit rate, so in order to increase your rate your future earnings years would have to be higher than one or more of your previous 35 highest earnings years. Our software permits you to enter projected future years of earnings so that you can gauge the effect that those earnings would have on your benefit rate. The software is also fully programmed to handle earnings test issues, so you may want to strongly consider using it to do your Social Security planning. And as I noted above, Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. 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 how early retirement benefits can affect later spousal benefits, survivor's benefits before retirement benefits, the rate of reduction due to taking benefits early, the application of delayed retirement credits and the monthly versus annual earnings test. 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.

See more Ask Larry answers here.

Ask Larry about Social Security here.

Will Retirement Benefits At 63 Greatly Reduce My Wife's Spousal Benefit Later?​​

Hi Larry, My wife is 63. I am 64. I plan on taking my Social Security retirement benefit at full retirement age. My benefit is substantially higher than my wife's. If she collects her retirement benefit at 63, will it substantially reduce her spousal benefit when I start collecting at my full retirement age? Thanks, Jim

Hi Jim, I don't know what you'd consider to be substantial, but filing at age 63 would reduce your wife's benefit rate even if she later qualifies for additional spousal benefits on your record. And if she files for her spousal benefit at your FRA before she reaches her own FRA, it will be further reduced.

I should also mention that if you start drawing your benefits at FRA you will be limiting both your benefit rate and your wife's potential survivor rate as a widow to no more than the amount of your Primary Insurance Amount (PIA), which is equal to your full retirement age (FRA) retirement benefit amount. Before applying for any benefits, you and your 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 Draw My Widow's Benefit At 66 And Switch To My Own Retirement Benefit At 70?​​

Hi Larry, My husband passed away in July of 2013. He was 62 and had started receiving disability about six months before he died. I have been working full time. I will reach my FRA in December. I plan on applying for widows benefit to start then. From what I have read, I can get a widow's benefit equal to my husbands full retirement benefit when I turn 66. I plan on continuing to work for a while yet. If I restrict my application to my widow's benefit only, can I switch to my retirement benefit at 70? Thanks, Wendy

Hi Wendy, I'm sorry for your loss. Yes, you can start drawing widow's benefits at your full retirement age (FRA) and then switch to your own retirement benefit at 70 if your own benefit rate is higher than your widow's rate at that time. You can draw benefits starting with the month you reach FRA regardless of how much you earn. But if your earnings before FRA would be low enough to permit you to be paid benefits for months prior to FRA, it could be better to claim benefits early. Best, Larry

Is It Correct That If A Person Files For Their Retirement Benefits At 62, Any Subsequent Spousal Benefits Would Also Be Paid At Their Age 62 Rate?

Hi Larry, Is it true that if a spouse starts her own retirement benefit at 62 at a reduced rate but her husband who is older waits to claim his retirement benefit until she reaches full retirement age, the wife's spousal benefits will still be reduced to the qualifying percentage calculated at the time she first began her retirement benefit at 62. Is that correct? Thanks, Fred

Hi Fred, That's not correct. In the scenario you present the spouse would retain her own retirement benefits at the same reduced rate, but any additional spousal benefits would be unreduced.

For example, say Bill files for his Social Security retirement benefits this year at age 62. Bill's full retirement age rate, or primary insurance amount (PIA), would be $800, but his reduced age 62 rate is $580. Bill's wife files for her Social Security retirement benefits when Bill reaches his full retirement age (FRA) of 66.5, and her PIA is $2,000. Bill's spousal benefit amount would be calculated by subtracting his PIA from 50% of his wife's PIA, which in this example would be $200 (i.e. $2,000 / 2 – $800). No reduction would be applicable to the spousal benefit since that benefit didn't start until Bill's FRA. Bill's unreduced spousal benefit would then be added to his reduced retirement benefit to give him a combined monthly benefit of $780 (i.e. $580 + $200). Best, Larry


Am I Wrong In Thinking That I Should Receive Delayed Retirement Credits?

Hi Larry, I was born in July of 1949. I filed and suspended my Social Security benefits. I was told at the time that I filed that I would get 8% increase of my benefits each year that I suspended them and when I claim for the suspension payments benefits when paid in back credits the 8% will be figured in. My local Social Security office said there would be no 8% increase and that I would only get the amount that was in place when I filed back in 2015. Am I wrong in thinking that the 8% would apply? Thanks, Jerry

Hi Jerry, If you filed for and suspended your Social Security retirement benefits at your full retirement age (FRA) of 66 and you don't draw benefits for any months prior to age 70, your benefit rate will include a 32% delayed retirement credit (DRCs). That's based on the monthly DRC rate of 2/3rds of 1%, or 8% per year. By the way, a person can earn DRCs whether they file for and suspend their benefits or if they simply delay applying for benefits.

The only way that you would not receive DRCs is if you chose to reinstate your benefits retroactive to your FRA, in which case you'd be paid your retroactive benefits in a lump sum. You would be allowed to do that if you suspended your benefits prior to 4/29/2016, although I'm not suggesting that you should do so. Best, Larry


If I Claim Benefits Now, Will The Earnings Limit Apply Only To My Earnings For The Rest Of The Year?

Hi Larry, I turned 65 in April. If I claim my Social Security retirement benefits now, will the earning limit be for the rest of the year, or will all of 2019 be counted. Also, by continuing to work, what can I expect my benefit amount of $1,707 to become as I continue to work at an anticipated rate of about $30,000 per year until I am 70. So confusing. Thanks, Martin

Hi Martin, Social Security's annual earnings test counts your entire calendar year earnings, regardless of what month you start drawing benefits. So if you claim benefits now and you end up earning more than $17,640 for the calendar year of 2019, you'll likely lose $1 of your 2019 benefits for each $2 that your earnings exceed the $17,640 limit.

There is, however, an alternate monthly earnings test that can be used instead of the annual earnings test in the first year that you claim benefits. Using that test, regardless of how much you've earned in the months prior to the first month that you claim benefits, you could still be paid all of your benefits for any months of 2019 in which your earnings don't exceed $1,470.

How much your additional years of earnings would increase your benefit rate, if at all, would depend on how much you earned in past years. Social Security uses an average of your highest 35 years of wage-indexed earnings to calculate your retirement benefit rate, so in order to increase your rate your future earnings years would have to be higher than one or more of your previous 35 highest earnings years. Our software permits you to enter projected future years of earnings so that you can gauge the effect that those earnings would have on your benefit rate. The software is also fully programmed to handle earnings test issues, so you may want to strongly consider using it to do your Social Security planning. And as I noted above, Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

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

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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....