Today’s column addresses questions about when the earnings test no longer applies, getting divorced spousal benefits, when widow’s and other survivor’s benefits can be paid and how years of substantial covered earnings can reduce the effect of the Windfall Elimination Provision (WEP). Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc, which markets Maximize My Social Security and MaxiFi Planner.
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Does The Social Security Earnings Test Apply In The Month I Reach 66?
Hi Larry, I currently earn over $100,000. I was born in October, 1954 and I plan on retiring in November, 2020 after reaching my full retirement age of 66 in October. Can I apply for my Social Security retirement benefits without penalty in October with payments starting in November even though I’ll still be employed in October? I could delay until November but would not receive a payment until December so I’d rather not delay if possible. Thanks, Richard
Hi Richard, Yes. There’s no limit on the amount you can work and earn once you reach full retirement age (FRA), which in your case is October 2020. So you could claim your benefits in October and be paid for that month regardless of how much you earn. As you note, your October check will actually arrive in November since Social Security pays one month in arrears. But beginning in October, you can make any amount of money and there will be no penalty.
If you decided to keep working, it’s actually possible that doing so could increase your retirement benefit amount. Your benefit amount is calculated as an average of a person’s highest 35 years of wage-indexed Social Security covered earnings, so if any current or future income replaced earlier lower earning years, your amount would increase. You could also of course still suspend your retirement benefit after filing for it once your at or past your FRA and earn delayed retirement credits (DRCs) of 8% per year. My company’s software — Maximize My Social Security or MaxiFi Planner — accounts for both these factors and will help you understand all of your filing options so you can maximize your benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry
How Do I Get Divorced Spousal Benefits?
Hi Larry, I am 56 and have been on SSDI since 2010. In 2009, I got divorced after being married 17 years. My ex is about to retire this year and will be 67. How do I get the divorced spouse benefits? He always made a lot more the I have since I was mostly raising four children the whole marriage. Right now I receive $890 a month in SSDI. I’m hoping that I qualify somehow for much one day. Thanks, Carmen
Hi Carmen, If your ex’s primary insurance amount (PIA) is more than twice as much as your PIA then you could potentially qualify for divorced spousal benefits in addition to your Social Security disability (SSDI) benefits, but not until you reach 62. A person’s PIA is equal to their Social Security retirement benefit rate if they start drawing at full retirement age (FRA), or their full SSDI rate.
If you wait until FRA to start drawing your divorced spousal benefits, you’d get the full difference between 50% of your ex’s PIA and your PIA. That would then be paid in addition to your own SSDI rate. But if you start drawing the divorced spousal benefits at 62, the divorced spousal rate will be reduced for age. Best, Larry
Am I Entitled To My Deceased Husband’s Social Security?
Hi Larry, My husband recently passed away. Am I entitled to a Social Security widow’s benefit. We have a 16 year old — is she entitled to a Social Security benefit from his record also? Thanks, Ellie
Hi Ellie, Assuming that your husband was insured for Social Security benefits, then you could potentially qualify for widow’s benefits if you’re at least 60, or at least 50 and disabled. The only way you could qualify for survivor’s benefits before then is if you have a child in your care who qualifies for child’s benefits and who is either under age 16 or disabled.
Biological children of a deceased worker aren’t required to have been dependent on the deceased parent in order to potentially qualify for child benefits, so it sounds like your daughter should qualify. Child benefits can be paid to unmarried children who are under 18, age 18 to 19 and attending high school, or disabled children of any age provided they became disabled prior to age 22. Best, Larry
Will Social Security Recalculate My WEP Reduction If I Have Additional Substantial Earnings Years?
Hi Larry, I am subject to WEP. I am drawing teacher retirement. I have 21 years of substantial earnings as I stopped teaching at 46 and worked as CPA for over 20 years. I wish to start my Social Security retirement benefits this November when I will be 68. I will continue to report substantial earnings for 2–3 more years. Will the SSA recalculate my increase in substantial earnings related to WEP, or do I need to ask them to do that? I know they will recalculate for a new PIA if that applies and it probably should. I understand that SSA does its recalculations to be effective in January each year. Thanks, Trevor
Hi Trevor, The short answer is yes. Social Security automatically recalculates Social Security retirement benefit rates to consider both additional years of earnings, and additional substantial earnings years for Windfall Elimination Provision (WEP) purposes.
It sounds like the increases in your benefit rate that would result from additional years of earnings would be twofold. Social Security retirement benefits are calculated based on an average of a person’s highest 35 years of wage-indexed Social Security covered earnings so if you have less than 35 such years, you’ll be replacing zero earnings years with your additional earnings. And on top of that increase, if you have additional years of earnings that are defined as substantial for purposes of the WEP provision and if you currently have between 20 and 30 such years, then the amount of WEP reduction applied to your benefit rate would likely decrease by 5% for each additional substantial year up to 30 years. If you reach 30 substantial Social Security covered earnings years, then no additional WEP reduction would apply.
The only way that an additional year of substantial Social Security covered earnings might not increase your benefit rate if you currently have between 20 and 30 substantial earnings years is if the amount of your WEP reduction is being calculated based on the WEP guarantee provision. The WEP guarantee provision limits the amount of WEP reduction to no more than 50% of the full amount of a person’s non-covered pension. The WEP guarantee normally only applies if a person’s non-covered monthly pension amount is less than roughly $800.
Bottom line, both types of increases described above should be done automatically with no action required on your part. However, such recalculations aren’t processed immediately. Social Security usually processes those types of recalculations in the fall of the year following the additional year of earnings, but any resulting rate increases are retroactive to the person’s payment for January of that year. Best, Larry
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