​​​​​​Will My Spouse’s Earnings Reduce My Spousal Benefit?

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 explores the effects of a the earnings test on spousal benefits, widow(er)’s benefits before retirement benefits, how disability benefits become retirement benefits at FRA and retirement benefits before spousal benefits. Larry Kotlikoff is the founder and president of Economic Security Planning, a company that markets Maximize My Social Security, a Social Security benefits calculator referred to in this post.

See more Ask Larry answers here.

Ask Larry about Social Security:

Will My Spouse’s Earnings Reduce My Spousal Benefit?​​

Hi Larry, I am past my FRA and I am currently receiving my spousal benefit. I understand that my spouse’s benefits will be reduced (by $1 for each $2 she earns above the exempt amount for the earnings test this year. If she earns more than $17,040 in 2018, will my spousal benefit be reduced when her benefit is cut or reduced because of her excess earnings? Thanks, Joseph

Hi Joseph, Yes, both your and your wife’s benefits would be subject to withholding in order to recover any amount required under Social Security’s earnings test.

For example, say Jane files for retirement benefits this year at age 64 and her husband Bob files for spousal benefits on Jane’s record. Jane’s reduced retirement rate is $700 and Bob’s spousal benefit is $400. Jane will earn $21,440 this year, or $4,400 more than the earnings test exempt amount of $16,920. As a result, $2,200 would need to be withheld from the benefits payable on Jane’s record. So, in this example, both Jane and Bob’s benefits would be withheld for 2 months in order to recover the required amount of $2,200. Best, Larry

Can I Start Drawing Widow’s Benefits At Age 66 And Allow My Own Rate To Grow Until Age 70?​​

Hi Larry, I turn 66 early next year and am still working full time. I don’t plan on filing for my Social Security retirement benefit until I turn 70. My husband passed away in 2004. Can I start receiving my widow’s benefit based on his record when I turn 66 while waiting till I claim my retirement benefit at age 70? I intend to continue working. I was told by Social Security that I make too much money and cannot claim my survivor’s benefits if I am working, only if I retire. Is this correct? Thanks, Elizabeth

Hi Elizabeth, Yes, you can. There is no limit on your earnings once you reach your full retirement age, which is 66. And, unless you will earn more than the annual exempt amount in January next year, you could probably start receiving benefits effective January rather than February of 2019. Assuming that your age 70 retirement rate would be higher than your unreduced widow’s rate, that would likely be your best strategy unless your earnings would be low enough to allow you to start receiving widow’s benefits even before January. An expert Social Security benefits calculator as described in other answers can help you determine your optimal filing strategy. Best, Larry

When Can I File For Regular Social Security?​​

Hi Larry, I’ll be 63 next year. I’ve been on disability since 2012 but only receive $797 per month. I’m forced to live with my son and his wife due to my income. When will I be able to file for my regular Social Security retirement benefit so that I can possibly have enough income to live on my own? Thanks, Catherine

Hi Catherine, If you are receiving Social Security disability benefits (SSDI), then you are already essentially receiving your ‘regular’ Social Security benefits. Drawing SSDI benefits is the basically the same as drawing your full retirement age benefit rate before full retirement age (FRA) due to the fact that you’ve become unable to work.

It sounds like your SSDI benefits will simply convert to regular retirement benefits at the same rate when you reach FRA. If you think that you might qualify for other benefits on the record of a spouse or former spouse, you may want to look into the possibility. Best, Larry

Can You Help Me Understand My Options?​​

Hi Larry, My husband passed away last year. I collect benefits for our two children but it’s still hard to make ends meet. I was told I could also collect benefits if I file for them even though it’s been a year. Is this true? And I also was told that if i do receive benefits, the only thing they will do is take the money I get now and just split it 3 ways without increasing what we get. Thanks, Marla

Hi Marla, I’m sorry for your loss. You could probably qualify for survivor benefits if either of your children are under age 16 or disabled, or if you are at least age 60. However, there is a family maximum benefit (FMB) that can be claimed on a single record that could limit the total amount of your family’s benefits to no more than the amount that your children already receive. In that event, you wouldn’t increase the total amount payable if you opted to file for benefits.

For example, say Jane and her two children are potentially eligible for survivor benefits on the account of her deceased husband John. John’s Primary Insurance Amount (PIA), which is equal to his full retirement age (FRA) retirement benefit amount, was $800, and the family maximum payable on his record is $1,200. Jane and her children would individually each be eligible for 75% of John’s PIA, or $600. However, if they were all paid that much the total amount payable would exceed the family maximum of $1,200. So, the benefit amounts for Jane and her children would need to be adjusted to $400 each. If Jane chose not file, though, her children could each get their full rate of $600 without exceeding the FMB.

In most cases the FMB for survivor’s is more than 150% of the deceased’s Primary Insurance Amount (PIA), which is equal to his full retirement age (FRA) retirement benefit amount. In that event, it would likely be advantageous for you to apply for survivor benefits unless you are working and your earnings would prevent you from receiving benefits. Best, Larry

Can My Wife File For Her Benefits At Age 66 And Switch To Spousal Benefits Later?​​

Hi Larry, I’m 55 and the high earner. I’d like to claim my Social Security retirement benefits at 70. My spouse is soon turning 66 and has significantly lower earnings. Can my spouse claim retirement benefits at 66 and later, when I claim benefits at 70, switch to the much more attractive spousal benefits? I bought your very good book and thought I read that once you claim the retirement benefits you can’t later switch to spousal benefits. The age difference seems to make spousal benefits from me out of reach or at least very difficult. Do you have any insight on how I might be able to offer spousal benefits to my spouse in this context? Thanks, Diana

Hi Diana, Your wife couldn’t switch from retirement to spousal benefits, but she could potentially qualify for additional spousal benefits when you file for your retirement benefit. For example, say Bill’s Primary Insurance Amount (PIA), which is equal to his full retirement age (FRA) retirement benefit amount, is $2,000 and his wife Sally’s PIA is $500. Sally files for her retirement benefits at full retirement age and receives her full PIA of $500 monthly. Fifteen years later, Bill files for his retirement benefits and Sally files for spousal benefits on Bill’s record. Sally’s spousal benefit would be calculated as 50% of Bill’s PIA minus her own PIA, or $500 (i.e. $2,000 ÷ 2 – $500). Sally would then be paid both benefits, or a combined monthly amount of $1,000. Best, Larry

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

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