MAKING SENSE -- September 17, 2012 at 9:57 AM ET
Larry Kotlikoff Answers Your Social Security Questions
Two men hold hands with their marriage license after their wedding ceremony at the Manhattan City Clerk's office in New York. Photo by Jin Lee/Bloomberg via Getty Images.
Larry Kotlikoff's Social Security "secrets" and his answers to your questions (here, here and here) have prompted so many of you to write in that we now feature "Ask Larry" every Monday. We are determined to continue it until the queries stop or we run through the particular problems of all 78 million Baby Boomers, whichever comes first.
To investigate further how and when best to collect, you can try Larry's software: Maximize My Social Security. Note, however, it is not free.
Shelley: My husband, 62, is eligible to receive disability benefits. I am 60. If he took these benefits, what impact would that have on my ability to receive his Social Security benefits after his death? My husband had higher lifetime earnings.
Larry Kotlikoff: My understanding is that your survivor benefit is not based on your husband's disability benefit, but on his retirement benefit. Your husband can take disability benefits now and, at full retirement age, suspend his retirement benefit (his disability benefit is automatically converted to his retirement benefit) and wait until 70 to start his retirement benefit. That way, once he passes away, you'll receive the highest possible survivor benefit. And when he starts at 70 to collect his retirement benefit, it will be as large as possible. You can wait until full retirement age and collect just your spousal benefit. Your husband needs to make sure he pays his Medicare Part B premium out of pocket when he suspends his retirement benefit. Otherwise, he'll just lose four years of benefits and get no hire benefit starting at 70!
Randi Wershba: I'll be 62 next year. I worked for 24 years, but haven't worked in 16 years. I earned enough credits to qualify for Social Security. My husband is 70 and began collecting his Social Security this year at the maximum rate. I'd like to start collecting Social Security on my account when I reach 62, then switch to being a dependent spouse at 66 -- my full retirement age. That way, I'll collect 50 percent of his rate, which is higher than my own rate at 62 and a little more than my predicted rate at 66. Can I do this?
Larry Kotlikoff: No, you can't do this. If you apply for your retirement benefit early, you'll be deemed to be applying for your spousal benefit as well. The best thing is likely to be for you to wait until full retirement age, then collect just your spousal benefit and then at 70 collect your retirement benefit.
Allie: One thing I don't see in any of the current debate on Social Security is the issue of changing it to reflect modern lifestyles. Thirty years ago it was changed to reflect the fact that people are living longer. But I still don't recall seeing any changes, like those that have taken place in the private sector, that recognize that most women now work, that married and unmarried people should be treated equally, etc. In the private sector, if you want to cover your spouse, former spouse or other dependents under your health care plan you have to pay for it. Not so under Medicare. As long as your spouse and any former spouses are entitled to Social Security benefits based on your benefit, they also get free Medicare Part A (which would otherwise cost about $400 a month unless they had the required minimum quarters of covered employment). Likewise, in the private sector married people do not get to share their pensions with spouses or other people without paying a price (usually a reduction in their benefit, and ultimately the survivor benefit). No such reductions in Social Security. Furthermore, unmarried people cannot share their benefits with anyone (just as they cannot provide free Medicare Part A for anyone else).
Any thoughts on this? I realize Social Security and Medicare just reflect lifestyles long ago when they were drafted, but times have changed.
Larry Kotlikoff: The system is incredibly complex and incredibly unfair and needs to be frozen in place and replaced with my plan at www.thepurplesocialsecurityplan.org.
Susan McD: My husband is 72 and took Social Security at full retirement age. I'll be 62 in two months. My Social Security at 62 is higher than what the spousal benefit would be. Can I take spousal Social Security when I'm 66 even if my benefit will be higher at 66 than the spousal benefit? I got the impression from the Social Security website you can't take spousal if your own is the higher amount of the two. I was laid off last month and may not find another job. Should I take Social Security now?
Larry Kotlikoff: Your best strategy may be to wait until full retirement age and then apply only for your spousal benefit and start collecting your highest possible retirement benefit starting at 70.
Ellen Waters: I am 62. If I start collecting Social Security, can my husband collect the spousal benefit now at 64 and then get his full amount at 70?
Larry Kotlikoff: No, your husband will be forced to take his retirement benefit early. The best option is probably for you to wait until full retirement, take just your spousal benefit then, have your husband file and suspend his retirement benefit when you reach your full retirement age, and then have him take his retirement benefit at 70.
Scott: I have had cancer since 2008 and am still doing treatments. I got Social Security Disability at age 62 -- I am now going on 66 and am still getting disability. I'm worried that maybe because of my age, I should not be getting disability. How do you know when it ends?
Larry Kotlikoff: At full retirement age, your disability benefit converts to a full retirement benefit from Social Security. I believe your check can't get smaller except for Medicare Part B premiums that will start being taken out of your check.
Paul adds: During the weeks Larry has been answering your questions here on Making Sen$e, he's been running into more and more perversities of the Social Security system. He's been keeping a list of them -- what he calls "gotchas." We will post the list here tomorrow.
As usual, look for a second post early this afternoon. But please don't blame us if events or technology make that impossible. Meanwhile, let it be known that this entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman answers your economic and business questions.