Ask Larry: When Do I Get Back What I Paid to SS?
Blank Social Security checks are run through a printer at the U.S. Treasury printing facility. Photo by William Thomas Cain via Getty Images.
Larry Kotlikoff’s Social Security original 34 “secrets”, his additional secrets, his Social Security “mistakes” and his Social Security gotchas have prompted so many of you to write in that we now feature “Ask Larry” every Monday. We are determined to continue it until your questions dry up 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
wmay: I am 65 and still working but I’m going to start collecting my Social Security. Could I draw my husband’s Social Security if he is drawing disability?
Larry Kotlikoff: Yes, but consider waiting until full retirement age, then applying for and collecting only your spousal benefit, and then waiting until age 70 to collect your own retirement benefit.
Buzz Arnold: My co-worker’s husband died suddenly. She is 58. She was told she can collect her husband’s benefit at age 60, but only 71 percent. Can she then let her benefit ride until she reaches age 70 and switch?
Larry Kotlikoff: Yes she can. But it may be better for her to take her own benefit early — at 62 — and then switch at full retirement age to her unreduced survivor benefit. Which is best depends on the relative earnings of your co-worker and her deceased husband. If he earned substantially more than she did, her survivor benefit may be greater than her own.
Donald Molinelli: How long does a Social Security retiree have to live before he gets back all he contributed to Social Security?
Larry Kotlikoff: This is an actuarial question that needs to account for all possible dates of deaths and other outcomes. This study, by myself and Jagadeesh Gokhale, and this one by Eugene Steuerle, will give you a pretty good answer. But Paul urges me to remind you that Social Security was set up as a “pay-as-you-go” system in which each generation pays for the last one. The payroll tax is not designed to be a savings account on which you can draw and/or earn a return.
abe: My wife receives, as a spousal benefit, less than what I receive. She worked for a few years and does not have enough credit. In the event of my death, will she receive more than she is receiving now?
Larry Kotlikoff: Yes, she will then receive what you are now receiving. But she should be aware that her survivor benefit will be reduced if she begins it before her full retirement age.
Kate Robinson: When one spouse dies, what amount of their Social Security does the other receive?
Larry Kotlikoff: If the spouse was collecting a retirement benefit when he/she died, the survivor benefit equals what the deceased spouse was collecting. If the spouse dies before full retirement and was not collecting, his/her full retirement benefit is taken to be what he/she would have received has he/she waited until full retirement age to collect.
If the spouse dies after full retirement and wasn’t collecting, his/her retirement benefit will be calculated as the benefit he would have received had he applied for it at the date of his death. This benefit will include the delayed retirement credits to which he is entitled. Now bear in mind that if the surviving spouse takes his/her survivor benefit early — before full retirement age — it will be permanently reduced. Also note that if the survivor benefit exceeds the survivor’s own retirement benefit, Social Security will give the survivor two benefits that add up to the survivor benefit. The first is the survivor’s own retirement benefit. The second is the difference between the survivor’s survivor benefit and his/her own retirement benefit. This way Social Security can claim the survivor is getting his/her own retirement benefit, when in fact, the total monthly check would be the same if the survivor’s own retirement benefit were zero. Social Security does this to make us believe we are getting back something for our own contributions when, in many cases, this is, in fact, not the case.
Donna Jones: Larry, I’m turning 62 soon and my husband is 74. Can I take half of his Social Security and not claim mine until 66? Is that a smart move?
Larry Kotlikoff: No, you can do this starting at full retirement age, but not before. If you take your spousal benefit before full retirement age, you’ll be forced to take your retirement benefit as well. Once you reach full retirement age, you can take just the spousal benefit and wait until 70 to take your highest possible retirement benefit.
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This entry is cross-posted on the Making Sen$e page.