Today’s column examines the availability of lump sum payments after filing and suspending, beginning benefits before 66, SSDI before 62, public pensions and Form SSA-44. 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:
Can I Get A Lump Sum After Filing And Suspending My Retirement Benefit?
Hi Larry, Let’s say I am single and file for and suspend my retirement benefits at full retirement age. If I’m diagnosed and given three months to live at age 68.5, can I receive a lump sum benefit back to my FRA? Or is the lump sum only payable back 6 months? Or would it not be available at all? Thanks, Gary
Hi Gary, For people who voluntarily suspended their benefits prior to 4/30/2016, the answer is yes. But, the answer is no for people who suspend their benefits on or after 4/302016. And if you file for and suspend your retirement benefits after 4/29/2016 as opposed to simply not filing, you could not even claim 6 months of back pay. The earliest that you could reinstate payments in that event is the month following the month of your request to reinstate. On the other hand, if you simply waited until age 68.5 to file for benefits you would have the option of claiming up to 6 months of back pay. Best, Larry
Can I Start Drawing Benefits Four Months Before Turning Age 66?
Hi Larry, Can I get my retirement benefit four months before I’m 66 and continue to work? Or should I wait till the month I turn 66 to collect benefits? How will one or the other affect how much I can earn from work? Thanks, Enrique
Hi Enrique, I can’t advise you whether or not you should wait until 66, but assuming that’s your full retirement age (FRA) you could start drawing 4 months before then depending on your earnings in those months. If you turned 66 in 2018 for example, you could have been paid for the months leading up to then provided that you either earn a total of less than $45,360 in the months before the month you turn 66, or if you earn less than $3,780 in each of the months for which you claim payment. And starting with the month that you turn 66, you could be paid regardless of how much you earn.
However, you should be aware that starting your benefits 4 months prior to FRA would lower your benefit rate by roughly 2.22%. Before filing, you can use an expert Social Security benefits calculator, such as Maximize My Social Security or other top quality software, to compare your options and determine your best filing strategy. You may have better filing options available to you that you haven’t yet considered. Best, Larry
Would Receiving SSDI Lower My Retirement Benefit Rate?
Hi Larry, I receive 100% VA disability benefits. I’m 58 years old. We have a disabled son, age 23, receiving SSI (offset for our “in-kind” contributions). I’ve applied for SSDI, with the idea that, if approved, my son could get off SSI and receive money from my SSDI.
However, I’m curious if receiving SSDI would lower my eventual Social Security retirement benefits. Up until recently, I had planned on waiting till I turned 70 to begin retirement benefits, last estimated at $4,000 per month. If I get SSDI benefits, they’re estimated to be about $2,500. Will doing so reduce my retirement benefit, and more importantly, will my son receive less when I kick the bucket? Thanks, Calvin
Hi Calvin, Your retirement benefit rate would not be lowered if you receive Social Security disability benefits (SSDI). Nor would it have any adverse effect on your son’s potential Childhood Disability Benefits (CDBs) on your record, either while you are living or after your death. If fact, your SSDI entitlement would likely have a positive effect on both your and your son’s future benefits because of the way that retirement benefit rates are computed when a person initially qualifies for SSDI prior to age 62.
Normally, retirement benefit rates are calculated using an average of a person’s highest 35 years of wage-indexed earnings However, when a person qualifies for SSDI prior to 62 fewer years are used, permitting some lower earnings years that would otherwise drag down the person’s average annual earnings to be excluded. For example, if you are approved for SSDI at age 58, your future retirement rate will likely be based on an average of your highest 31 years of wage-indexed earnings as opposed to 35 years. This can have a particularly positive effect on benefit rates when it results in the exclusion of zero earnings years that would otherwise be used in the calculation.
If you are approved for SSDI and continue to receive those benefits until your full retirement age (FRA), your SSDI will automatically convert to regular retirement benefits at FRA. You could then choose to suspend your benefits in order to draw a higher rate at age 70, but that would not result in a higher CDB rate for your son either before or after your death. Furthermore, if you did choose to voluntarily suspend your benefits between FRA and age 70 your son could not be paid CDB benefits while your benefits are suspended. Best, Larry
Will My Social Security Be Penalized If I Draw A Pension From A State In Which I’m Not Residing?
Hi Larry, I will be collection a city pension in Massachusetts but living in New Hampshire when I reach my full retirement age (FRA). Will my Social Security benefits, which I earned from other employment, be penalized? Thanks, Micah
Hi Micah, Your place of residence is irrelevant to the determination of whether or not your Social Security benefits will be subject to reduction due to the Windfall Elimination Provision (WEP). If you are drawing a pension based on your work and earnings that were exempt from Social Security taxes, then your Social Security retirement benefits will be subject to a WEP reduction unless you meet one of the exceptions. Best, Larry
Do I Need To Submit A Form SSA-44 Now?
Hi Larry, I have just retired at 69. I’ve completed the application for Medicare Parts B and D. Do I need to submit an SSA-44 form now? Thanks, Phil
Hi Phil, You would only need to submit an SSA-44 if your income was high enough to require you to pay more than the standard Part B premium rate, but has been reduced due to a life-changing event. Medicare generally uses tax returns from 2 years ago to determine whether or not you must pay a higher Part B premium, but they can use a more recent tax year if a life-changing event has occurred. Normally, you would not file a form SSA-44 until after you receive a notice from Medicare informing you that they are requiring you to pay a higher premium rate. Best, Larry
To learn more about your Social Security options, visit Economic Security Planning, Inc.