Should I Take The Social Security Back Pay I’ve Been Offered At 70?

Today’s column address whether to take retroactive benefits at 70, spousal benefits before retirement benefits, divorced spousal benefits with a public pension, when spousal benefits become available and filing early to allow spousal 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.

See more Ask Larry answers here.

Ask Larry about Social Security here.

Should I Take The Social Security Back Pay I’ve Been Offered at 70?

Hi Larry, I am 70 and have delayed benefits until now. I’m still working. At an appointment with Social Security, I was offered $21,936 one time check but I would reset my benefit back 6 months and it would be $114 less per month. Also they stated they could go back another three months from when I made my appointment. The 9 month reset results in $209 per month less but I get a one time check for $32,040. Is there any reason to not take the $32,000 check? Why is this offered? Thanks, Jim

Hi Jim, The argument against opting for the retroactive lump sum payment is that it will cause you to receive a lower monthly benefit rate for as long as you live. And if you’re married and you die before your wife, her maximum widow’s rate on your record would also be lower if you choose to accept the lump sum.

That said, you are free to accept the back pay and the resulting lower monthly benefit rate if you so choose. The reason that it’s being offered to you as an option is because you’re permitted to claim benefits retroactively for up to six months prior to your month of filing if you apply for benefits after reaching full retirement age (FRA). And when you make an appointment with Social Security to apply for benefits, that establishes a protective filing date for you. So in your case, one of your options would be to elect to receive benefits for up to 6 months prior to the month of your protective filing date.

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

Could I File For Spousal Benefits And Hold Off Filing For My Own Benefits?

Hi Larry, I’m about to file for my my Social Security retirement benefit. I will be 62 in three months. My husband is 65 and has been receiving his Social Security retirement benefit since 62. During my last two years of employment, my earning were higher than his last year of employment. I have been retired for the past 30 months. Which is best option for me to get my maximum benefits? I’m confused if applying for spousal benefits would be an option for me and hold off of applying for my retirement benefits until 66 or 70? I’d like to maximize my benefits as best as possible. Thanks, Clara

Hi Clara, You couldn’t qualify for spousal benefits if your own primary insurance amount (PIA), which is the amount that you would receive on your own Social Security work record if you wait until your full retirement age (FRA) to start drawing, is at least half as much as your husband’s PIA. Since you were born after 1/1/1954, filing for spousal benefits only and delaying receipt of your own benefits is not an option for you.

When you start drawing benefits, you’ll only be paid essentially the higher of your own benefit rate or your spousal rate. And if you start drawing benefits at 62, your benefit amount will be reduced by roughly 27% to 32%. That reduction would continue for at least as long as both you and your husband are living. Best, Larry

Can I Collect Divorced Spousal Benefits And My Teachers Pensions?

Hi Larry, I am a teacher who will be collecting Calstrs and NVpers retirements. But I am also a divorced spouse. Can I also collect my divorced spouse benefit in lieu of my own Social Security retirement benefits? I have not found anyone who can give me a definite answer. Thanks, Teresa

Hi Teresa, I’m assuming that your Calstrs and NVpers pensions will be based on your earnings which were exempt from Social Security taxes. If that’s correct, then any Social Security divorced spousal benefits that you would otherwise qualify for would likely be offset (i.e. reduced) by 2/3rds of the amount of your teacher’s pensions. That would be due to the Government Pension Offset (GPO) provision, by the way.

Therefore, if you’re drawing your teacher pensions and they amount to more than 150% of the amount of your divorced spousal benefits, your divorced spousal benefits would be reduced to zero unless you meet one of the exceptions to GPO. Note that another provision, the Windfall Elimination Provision (WEP) reduces your retirement benefit. Best, Larry

Can I Collect Spousal Benefits Before My Husband Turns 62?

Hi Larry, I am currently 65 and I began collecting my own Social Security retirement benefit at 62. My husband just turned 60. He has a pension and will be forced to begin collecting Social Security at 62. Can and should I collect spousal benefit until he turns 62? Also, is it retroactive for the years I already have been collecting? Thanks, Maria

Hi Maria, You couldn’t qualify for Social Security spousal benefits at least until your husband starts drawing his retirement benefits, and even then you’ll only be eligible if 50% of your husband’s primary insurance amount (PIA) is more than your PIA. A person’s PIA is the amount they’d be paid if they wait until their full retirement age (FRA) to start drawing their Social Security retirement benefits. Best, Larry

Would It Be Advisable For My Wife To File At 62 So That I Could Draw Spousal Benefits?

Hi Larry, I retired at 67. My wife is 61 and still working.I was planning on waiting till 70 to start collecting Social Security benefits Would it be a better plan for my wife to file at 62 so I can collect spousal benefits till I reach 70? I expect my life to be 80 to 85 where as my wife with good genes may live to be 95. Both her parents lived in their 90s. I have heart disease and don’t expect a longer life. Please advise what is the best strategy for us. Should we both wait till FRA or even 70? Or Should I not wait till 70? We don’t need the money right now to support us. Thanks, Paul

Hi Paul, Having your wife file at 62 so that you could collect spousal benefits until age 70 is certainly a strategy to consider, but whether or not it’s your best strategy depends in part on your and your wife’s comparative benefit rates as well as your wife’s expected future earnings, if any. If your wife starts drawing her own benefits at 62, she’ll be stuck with a reduced benefit rate for at least as long as both of you are living even if she later qualifies for additional spousal benefits on your record. Best Larry

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

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