Ask Larry: Real Danger of Old Age Is Outliving Your Savings

Photo by Mark Bowden 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

Oren: I am 69 years old; I retired in 2003. This year, I got 60 percent disability from the VA for tinnitus — hearing loss — and depression from my loss of hearing. Can I receive Social Security disability benefits because I cannot work? Could I lose my VA benefits if Social Security approves my disability? Thanks.

Larry Kotlikoff: Very sorry to hear about your loss of hearing and I, like all Americans, thank you for your service with our military.

Unfortunately, if you are 69, you don’t quality for Social Security disability benefits, to the best of my knowledge. I presume you are getting Social Security retirement benefits. Your only option to securing a higher benefit — 8 percent higher — is to suspend your benefit for one year and start it up again at 70. If you do this, you need to pay your Medicare Part B premiums explicitly via a monthly check you write.

Jackie: I turn 65 in February and want to retire in June. If I already have earned $60,000, will I still get the full Social Security after June?

LarryKotlikoff: The earnings test continues until you reach full retirement age, which will be when you turn 66 in February 2014. As I regularly point out, you will get back, in later benefits, any earnings penalties you incur by “earning too much” but, as I even more regularly point out, you should seriously consider waiting until 70 to collect your retirement benefits and continuing to work. The real danger of old age is not dying. It’s living. More specifically, outliving your money. If you are married, divorced or widowed, there are other clever strategies to consider.

Larry Choate: I’ve applied for benefits on Nov. 29 as I’m turning 62 in December. My wife, 73, has been collecting her benefit since she turned 62. When do I receive my first check and does her benefit now increase?

Larry Kotlikoff: You have to be 62 for a full month before you can receive a check. But SS pays a month in arrears, so my guess is your first check will show up in March. You will qualify for a spousal benefit if half of your wife’s full retirement benefit exceeds 100 percent of your full retirement benefit. But you may do much better to wait until full retirement, at which point you can collect just your spousal benefit. It will equal half of her full retirement benefit if you aren’t taking your retirement benefit and have not filed for, but suspended collection of your retirement benefit. Under this plan, you’d wait until age 70 to collect your maximum retirement benefit. What strategy is optimal is not obvious. One needs to run the numbers.

*Pete Williams: My employer wants me to start paying the Social Security taxes on employees who work under me who get paid from my earnings. We all get checks for the company but my two employees’ checks come out of what my department does in dollars. I’m a commission employee and they are my helpers.

Larry Kotlikoff: If no one is paying these taxes, you best do so. It’s a legal requirement that employers submit FICA taxes — both the employer and employee shares — to the government. Nothing obviates this requirement.

If your employer was paying the FICA taxes but now wants you to do it — hey, that’s between you and your boss.

Li: A friend of mine told me that you should start drawing Social Security first before a pension so as not to have the SS offset. I thought it would be offset anyway if that is part of your private pension plan. Help! I am confused.

Larry Kotlikoff: Some pension plans reduce your benefit when Social Security kicks in. So it sounds like your friend has it backwards. But these offset plans usually condition the offset on reaching an age — for example age 62 — not on whether or not you actually start collecting Social Security benefits. Your plan may differ from what I view as the standard. So check with your HR office.

Marty Chenard: I applied at 63, and they said I couldn’t because I didn’t know the exact dates and locations of prior marriages (three marriages). I will be 66 soon. Is there any hope?

Larry Kotlikoff: You are asking about spousal benefits, I assume. If you got divorced from all three former spouses, but were married to one or more of them for 10 or more years, you are eligible for spousal benefits. Can’t you find someone who knows when and where you got married? Look at some old wedding pictures or ask some relatives. Once you know, you should be able to locate the marriage certificate in the local town office. Or check with your local Mormon Church. The Mormons have been putting these records on microfiche for years.

Alternatively, as long as you can remember the names of your former spouses (assuming you have not blocked them out), the Social Security office should be able to find them in its records, permitting you to get spousal benefits or, if they are dead, survivor benefits. If you have divorce decrees, you can use them to substantiate your marriages.

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 Rundown — NewsHour’s blog of news and insight.

Follow @paulsolman