Ask Larry: ‘Can I Get Medicaid Without Losing Social Security Benefits?’


A Doctor Examines A Senior Patient. Photo by Mario Villafuerte 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. Kotlikoff’s state-of-the-art retirement software is available here, for free, in its “basic” version.

Shannon: My mom is 64 and just had a heart attack and a stroke. She has no insurance. She has worked as an RN all the way up until her hospital stay a week ago. She’s going to be getting survivor benefits from dad’s Social Security but it doesn’t cover her bills from housing to medical bills. She does not qualify for disability yet and I want to get her help with doctor visits, food and medication. Her survivor benefits will start in the middle of October — can I get her Medicaid without her losing the Social Security benefits?

Larry Kotlikoff: First, I’m very sorry to hear about your mom and wish her all the best. Second, her Social Security benefits from your dad may leave her with income below the Medicaid limit, so she may not lose any of her Social Security benefits due to enrolling in Medicaid. Third, she could wait until 65 to collect her Social Security benefits, at which point Medicare will kick in.

Luke: My wife has been on disability for quite some time. When she turns 65, is she entitled to higher compensation?

Larry Kotlikoff: When she reaches full retirement age, she will go from receiving her disability benefit to receiving her Social Security retirement benefit. The amount probably won’t change. But she can suspend her retirement benefit — make sure to pay her Medicare Part B premium out of pocket — collect a spousal benefit on your record, and then collect a 32 percent higher retirement benefit starting at age 70.

Dave: My wife is 64 and on Social Security disability. I am a “retired” federal employee (under CSRS; did not pay into Social Security in this job). I have paid over 40 quarters into Social Security (life before federal employment and Army Reserve income). I am currently employed and pay the maximum Social Security tax. I am 61 . I was born in 1951 and my wife in 1948. What is the best strategy to maximize our Social Security income? I expect to work until I am at least 66, but more likely until 70.

Larry Kotlikoff: If you have 30 or more years of substantial earnings in covered employment, you won’t get hit by the Social Security Windfall Elimination Provision. But most likely you don’t have that earnings history and will get hit. It’s likely to be best for your wife to suspend her retirement benefit at full retirement age, at which point her disability benefit will automatically be switched to her retirement benefit. She should make sure to pay her Medicare Part B premium out of pocket. She could then collect a spousal benefit on your record, and then collect a 32 percent higher retirement benefit on her own work record, starting at 70.

Barbara: What is the age at which I can earn more than the scheduled amount and not be penalized by Social Security?

Larry Kotlikoff: The day you reach your full retirement age, you are no longer hit by the earnings test. But if you lose benefits before full retirement age due to the earnings test, you’ll get them back — via the application of an adjustment to your benefit level that occurs when you reach your full retirement age.

Bob Olwert: How can we start the process of collecting a spousal benefit that we weren’t aware existed? I was retired and not aware my wife could have started collecting at age 66.

Larry Kotlikoff: You could go to the Social Security office. But a warning: their ability to credit you for not having taken benefits in the past is quite limited.

This entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman answers your economic and business questions.