After you reach full retirement age, you can suspend your benefits and restart them at a higher value any time through age 70. Photo courtesy of Jim McGuire 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 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
Patricia Donnelly — West Haven, Conn: I will be 66 at the end of this month. I will receive my first Social Security check in January. I’m single, never married. When I went to Social Security to sign up, I asked if I could suspend my payment in the next year. I was told that I could but that I would have to pay back all payments that I have received. This is never mentioned in your articles.
Also, I was hired by the Veterans’ Affairs Department one month before Medicare and Social Security were deducted, so I paid for Medicare but not Social Security for those years. Luckily, I also worked in Social Security-covered employment part time so I have some credit. These are my lowest years of earnings, however. They would be among the highest if Social Security had not been deducted.
I will not get a Federal pension for this work since I’ve withdrawn my contributions. Is it possible for me to pay into Social Security what would have been paid if Social Security taxes had been deducted on my VA pay that was not covered by Social Security?
Larry Kotlikoff: Let me focus first on your first question. I think the person at the Social Security Administration gave you the wrong answer.
You asked to suspend your benefit, not withdraw it. The person at the Social Security Administration must have thought you were asking to withdraw it or didn’t understand that you have the option to suspend it. If you go back to that person and he or she doesn’t agree that you can suspend (not withdraw) your benefit once you reach full retirement age, ask to speak to his or her supervisor.
After you reach full retirement age, you can suspend your benefit and start it up again at a higher value any time up through age 70. But the increment to your benefit, which is the result of the delayed retirement credit, will be applied to the benefit level that you were receiving at the time of suspension. So, for example, had you started taking your retirement benefit at age 62 (and not lost any benefits between 62 and now due to the earnings test), your age-62 benefit would have been reduced by 30 percent compared to your full retirement benefit. That means any delayed retirement credits from suspending your retirement benefit would be applied to your reduced, not to your full retirement benefit.
If you were to withdraw your application, which you can only do within one year of first filing for your retirement benefit, you would get to start from scratch but have to repay everything you received. In your case, we’re talking about, I believe, only one month’s benefits, so whether you repay that month’s benefit or suspend it won’t make a huge difference to the retirement benefit you’ll receive when you restart it.
Regarding your other question, my understanding is that you worked in non-covered employment and are wondering if you can voluntarily pay Social Security taxes on those earnings in order to qualify for higher benefits. The answer is no. However, since you withdrew your civil service contributions instead of receiving a federal pension, your Social Security benefits will not be reduced by the Windfall Elimination Provision.
Robert Chester — Palm Harbor, Fla.: If I collect Social Security at 65 (my full Social Security would be at 66) and get a job, can I stop these benefits and restart at 66 to collect full benefits?
Larry Kotlikoff: No, you can’t suspend your benefits until you reach full retirement age. But if you earn enough money to lose all your benefits via the earnings test, Social Security will treat you at age 66 and thereafter as if you had never applied for your retirement benefit when it comes to calculating your own retirement benefit down the road. But remember that the minute you file for your own retirement benefit, your option to file for a full spousal benefit (as opposed to an excess spousal benefit) disappears.
Bob Hines — Piqua, Ohio: My wife and I are 66 years old. She started collecting Social Security at age 62 but continues to work part time. I think she is allowed to earn $14,500 without penalty. I started collecting my Social Security at age 66 but continue to work full time mostly because my group health insurance pays the lion’s share of my insulin pump and continuous glucose monitoring supplies.
Despite having diabetes for 35 years, I’m still in good health. I tentatively plan to retire in April of 2014. In January 2014, my Social Security will be at $2,037 a month. My wife will get $858 per month Social Security in January 2014. I stumbled on your column, but I’m still confused about the spousal benefit.
Friends have told me my wife would be eligible for half of mine. That would give her a $160.50 increase per month. We asked a lady at the Social Security office, and she said my wife wasn’t eligible for half of mine. Could she be mistaken? We’ve been working for 48 years and would like a rest.
Larry Kotlikoff: The lady at the Social Security office has it right. Because your wife filed for her own retirement benefit, her total benefit is her reduced retirement benefit plus her excess spousal benefit, not her full spousal benefit. Her excess spousal benefit is half your full-retirement-age benefit less 100 percent of her full-retirement-age benefit (i.e., the amount she would have received on her account if she had waited until age 66 to apply). If the excess spousal benefit is negative, it’s set to zero. If this is your wife’s case, her spousal benefit won’t equal half of your retirement benefit; it will equal zero.
Had she not filed for her own retirement benefit, she could, indeed, collect a full spousal benefit equal to half of your full retirement benefit starting at full retirement age, but only if she applied just for a spousal benefit. The minute one files for a retirement benefit, one’s ability to get a full spousal benefit (half of one’s partner’s full retirement benefit) goes poof!
As I discussed in a recent column, Social Security could not make this more confusing for people.
Here may be the best thing for you and your wife to do. You, yourself, can repay all the benefits you’ve received and then apply just for a full spousal benefit on your wife’s account. You can then wait until 70 to collect your highest possible retirement benefit. It will be 32 percent larger, after inflation, than it is now.
For her part, your wife can suspend her retirement benefit and start it up again at 70 at a higher value. If she just turned 66 (her full retirement age), her benefit at 70 will also be 32 percent larger than what she is now collecting. If she is some months beyond her 66th birthday, the increase at 70 in her benefit will be less than 32 percent.
If you are pressed for funds or are sure you will die at a fairly early age, this may not be the best strategy. Software programs whose calculations under the hood are highly accurate can help you consider other options. But they must properly value your remaining lifetime Social Security benefits and incorporate the option for current recipients to suspend their benefits between full retirement age and 70 to take advantage of the delayed retirement credit.
Daniela — Sacramento, Calif.: My question is simple, but I can not find an answer in any of the Social Security papers. I am 62, and next month, I will receive a spousal benefit check from Social Security. I do not have enough credit to get my own retirement. My husband is now 71 years old, and I am wondering if I will be a widow later on, can I still apply to get the widow benefit?
Larry Kotlikoff: When your husband dies, you need to inform Social Security and then they will provide you with a survivor benefit, which should equal at least as much as what he is now receiving as a retirement benefit.
Please realize that by taking your spousal benefit before full retirement age — and, if your husband dies, taking your survivor benefit before full retirement age — you will be permanently reducing your benefits. For example, your spousal benefit, were you to wait until full retirement age (66) to collect it, would be 43 percent higher, for as long as you husband survives.
Susan — Brooklyn, N.Y. At what age will I collect the most Social Security? I was born in March 1955.
Larry Kotlikoff: If we are talking about your retirement benefit, it’s age 70. If we are talking about your spousal benefit from your current spouse or, if you are not remarried, from an ex-spouse with whom you were married for 10 years, it’s 66 and two months. But (there are always buts with Social Security) your current spouse would need to be at least 62 for you to collect a spousal benefit at 66 years and two months. And your ex would need to be at least 62, and you would have to have been divorced for at least two years.
In regards to collecting a survivor benefit, the age at which you can get the highest survivor benefit is age 66 exactly. This is your survivor full retirement age. You might think the full retirement age for survivor benefits would be the same as the full retirement age for retirement and spousal benefits. For young’uns like you, the full retirement age for retirement and spousal benefits can be up to four months older than the full retirement age for survivor benefits.
Ellen Lubell — Saint James: I’m 63 and collecting Social Security. I had to get a job to support myself. Next year, I will make more money than they allow. Can I stop Social Security and collect when I reach the proper age? Do I have to pay back the money I already collected? And how does that work?
Larry Kotlikoff: You can’t suspend your benefit until you reach full retirement age. And you can’t repay all the benefits you received and reapply if you have been receiving benefits for a year or more. But don’t worry. When you reach full retirement age, Social Security will raise your retirement benefit (actually, undo the early retirement benefit reduction) to make up for any benefits you and your family members lose on your own earnings record via the earnings test between now and when you reach full retirement age.
This entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman answers your economic and business questions