Creative Commons Photo Courtesy of Flickr user Fabricator of Useless Articles
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.
Steve Gray: I am 62, self-employed and pay my wife an office salary. Will that affect my Social Security limit?
Larry Kotlikoff: You may be paying more taxes and getting fewer total benefits by paying your wife and reporting lower earnings for yourself, depending on how much money is involved and what both your earnings histories have been.
P. Hedgie: My husband and I are both retired. I was a California teacher and he worked for industry and then in his final years at a national research lab. We both had some jobs where we contributed to Social Security. However, having government pensions, our Social Security payments are severely reduced. After 18 years of paying Social Security, I get roughly $250 a month, or $150 after Medicare is deducted. My husband gets $1,800. If he dies first, can I collect his Social Security as a widow? I would like to be able to afford to come back to the United States.
Larry Kotlikoff: You can collect his Social Security as a widow, but what you collect will, sadly, be reduced by what’s called the Government Pension Offset provision. The official Social Security website has a good write-up.
Billy: Can a person in good health like myself at 38 get all or a portion of my Social Security benefits now?
Larry Kotlikoff: No. None. You need to wait until at least 62 to start collecting your retirement benefit. If you are married and have a spouse collecting her retirement benefit, you can collect a spousal benefit starting at 62, but in that case, you’d have to think carefully and use the right software to figure out what to do. If your spouse, if you have one, dies and you have her child in your care, both you and the child can collect survivor benefits regardless of your own age. And if your hypothetical spouse dies before you are 60, you can start collecting a survivor benefit at 60 regardless of whether you have one or more of her children under your care. But again, doing so may not be optimal.
Rich Grawer: If a teacher is WEPPED and the spouse applies for a spousal benefit, is that spousal benefit based on the teacher’s PIA WEP amount or the non-WEP PIAS?
Larry Kotlikoff: FYI, R.G. (and BTW), I suspect some in our audience will be a touch perplexed by acronyms like WEPPED, PIA, ETC. In actual words, WEP is the Windfall Elimination Provision, so I’d write WEPed, not “WEPPED.” But what matters is the definition. As the Social Security Administration website puts it: “The Windfall Elimination Provision affects how the amount of your retirement or disability benefit is calculated if you receive a pension from work where Social Security taxes were not taken out of your pay. A modified formula is used to calculate your benefit amount, resulting in a lower Social Security Âbenefit than you otherwise would receive.”
The answer to your question: the spousal benefit is based on the teacher’s Primary Insurance Amount (PIA). That’s Social Security shorthand for your full retirement benefit. However, because the teacher worked outside the Social Security system for some years, the PIA lowered by the Windfall Elimination Provision (WEP).
An important addendum: were the teacher to die first, the spouse’s survivor benefit is based on the teacher’s PIA, with no WEP being applied.
Barbara: I became disabled in 2004. Because I had bought a private disability insurance policy that paid more in benefits than I would have received with Social Security Disability, I did not file for SSD. I have recently found out I could have been collecting both. However, my Social Security statement now says: “You need 40 credits of work, and 20 of these credits had to be earned in the last 10 years. Your record shows you do not have enough credits in the right time period.” Given that the disability occurred when I did have enough credits, can I go back and retroactively file?
Larry Kotlikoff: I’m afraid I am not an expert on disability issues, so I suggest you pose this question at the Social Security office. However, my guess is that you will not be able to file retroactively.
Paul Watkins: My grandchild has Down syndrome. Is she entitled to Social Security benefits? My daughter worked until her daughter’s birth five years ago. Her husband has a long work history as well but is now unemployed.
Larry Kotlikoff: I believe your grandchild may be eligible for Supplemental Security Income, but I’m really not knowledgeable about SSI provisions. Your grandchild can’t receive regular Social Security child benefits unless one or both of her parents are collecting retirement benefits or one or both pass away. She should, however, be able to collect disability benefits when she reaches age 18.
Nilda: If l apply for a spousal benefit at age 62 with a reduced benefit, at 66 — the age of my full retirement — will l get the 50 percent of my spousal benefit?
Larry Kotlikoff: No, your spousal benefit will not change at full retirement age because you took retirement early. The only exception would be if you lost some or all of your spousal benefits due to the earnings test. In that case, the level of your spousal benefit should be increased when you reach full retirement age to make up on what you lost.
Stella Cardoza: I retired in 2005 and was told that because I am entitled to collect a CALPERS pension, I can’t collect from my husband’s Social Security benefits. Is that correct?
Larry Kotlikoff: This is the Government Pension Offset provision, but you need to run your case through the right software to see the true story here. You may lose all your benefits in the short run, but there may still be benefits available in the long run depending on the degree to which your CALPERS pension is inflation indexed. Also, if your husband passes away, you may get something because the survivor benefit is larger than the retirement benefit.
Gary: My son will turn 18 later this year, and I would like to know what he is eligible for through Social Security since he was diagnosed with high-functioning autism at age 2, but was born with the ailment. Can he receive a benefit payment for life?
Larry Kotlikoff: He should be eligible for disability benefits.
Paul Galos: My wife paid into Social Security and has her 40 quarters in to qualify, although her benefits will be minimal. After raising our children she returned to school and became a teacher. She has worked for the last 17 years for a district that does not pay into Social Security and when she retires from the district her benefits will be reduced under the windfall provision. If I should die, she would basically receive nothing if she tried to claim the widow’s benefit or if she tried to claim half of my Social Security instead of her own under the offset provision. Are there any variables in this? Are there resources we can access that would let her maximize what benefits are there? Social Security itself has not been very helpful in a preliminary manner.
Paul, the degree to which your wife’s survivor benefit will be completely wiped out by the Government Pension Offset and, if so, for how many years, depends on a number of factors. I’m not trying to advertise our software, but it can tell you the answer to this question. It does cost $40, but it will eliminate the guessing. Precisely what she earned when she was contributing, what your earnings history was, how long she was covered by Social Security, what pension she’ll be getting from her job as a teacher, and some other factors are all involved.