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Social Security rules are complicated and change often. For the most recent “Ask Larry” columns, check out maximizemysocialsecurity.com/ask-larry.
Boston University economist Larry Kotlikoff has spent every week, for over two years, answering questions about what is likely your largest financial asset — your Social Security benefits. His 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 feature “Ask Larry” every Monday. Find a complete list of his columns here. And keep sending us your Social Security questions.
Kotlikoff’s state-of-the-art retirement software is available here, for free, in its “basic” version. His new book, “Get What’s Yours — the Secrets to Maxing Out Your Social Security Benefits,” (co-authored with Paul Solman and Making Sen$e Medicare columnist Phil Moeller) was published in February by Simon & Schuster.
Watch Larry explain how Paul and his wife could collect an extra $50,000 in Social Security benefits:
Mark – Urbandale, Iowa: I had a service-related injury that worsened over time. In 1994, I was awarded 100 percent V.A. benefits. When I inquired with Social Security back then, I was told I didn’t qualify due to my V.A. benefits. I accepted the response. I figured they should know. I felt bad about even asking, but I inquired, because I had paid in since I was 16. Yesterday, my nephew told me that that wasn’t true. So I called today, and they said I didn’t qualify, because I haven’t worked in the last five years. (Of course I haven’t — I am disabled.) I don’t know if the law has changed since 1994, but by today’s laws, I would have qualified since I had worked back then. This just doesn’t seem fair. Can you help or perhaps provide advice?
Larry Kotlikoff: I’ve asked our Social Security Technical Adviser, Jerry Lutz, to weigh in.
Jerry Lutz: First, sincere thanks for your service.
You can still apply for Social Security disability benefits, but you will need to establish that your disability began within five years after you stopped working. Social Security should be able to access your V.A. medical records (with your permission), so there should be evidence available in your case. Remember, though, that Social Security’s definition of disability is different from the V.A., so there is no guarantee that you will be approved. If your claim is disallowed, don’t hesitate to file an appeal. Many disability cases are approved during the appeals process, and you can usually find an attorney who will represent you on a contingency basis. If you are approved, Social Security normally pays a maximum of 12 months of back pay on disability benefits. However, if you can establish that they misinformed you at the time of your first contact, it’s possible that they could pay you all of the retroactive benefits to which you would have been entitled.
Linda – North Canton, Ohio: My husband started collecting his Social Security at age 63. He passed away when he was 67. I continued to collect his Social Security. I am now going to turn 65 in June. Am I able to collect both benefits or just his, which is higher? I’m asking, because I received a letter from Social Security today saying that I was going to start collecting mine, but it didn’t mention what I was collecting from my late husband.
Larry Kotlikoff: I’m sorry for your loss. I presume you started to collect your widows benefit at age 60 or thereabouts. You are under no compulsion to take your retirement benefit before age 70, when it starts at its highest value. If you take it now, you may get nothing more in total benefits and forego the ability to receive much larger total benefits from age 70 on.
Please read my article in which Social Security whistleblower, John McAdams, explains that Social Security has — whatever the reason — deprived widows of the ability to collect larger checks in future years by having them file for their own retirement benefit at too young an age.
It sounds like you might be in this situation. I find it unlikely that Social Security would automatically file for your retirement benefit without your requesting they do so, but someone at Social Security may have talked you into this in some manner.
You cannot, in fact, receive both your retirement and your widow’s benefit at the same time. You’ll just receive the larger of the two benefits. But if your widow’s benefit is larger, Social Security will describe what it gives you as the sum of your retirement benefit plus your excess widow’s benefit. Your excess widow’s benefit is the difference, if positive, between your widow’s benefit and your retirement benefit. If you take your retirement benefit early, it will be reduced permanently (assuming you don’t suspend it between full retirement age and 70.) And if it’s less than the widow’s benefit, your check won’t go up. By not filing for your retirement benefit before age 70, you will let it grow potentially to the point that it exceeds or far exceeds your widow’s benefit.
The bottom line is 1) Go to your local Social Security office and show them the John McAdams column; 2) Tell them in writing (and have them sign an acknowledging receipt of your written communication) that you don’t want to take your retirement benefit at 65 if, in fact, doing so provides you nothing more or little more and keeps you from waiting until 70 to collect a much larger check; and 3) Restrict the conversation to your total check. Just ask them what will happen to your total check if you do one thing versus the other.
Anonymous: I am 50 years old. I was married the first time for 13 years. We got divorced, and I remarried and was married for 19 years. I would like to collect my first husband’s benefits when I turn 60, because his benefit is much higher. Will I be able to do that?
Larry Kotlikoff: If your first husband (presumably the higher earner) passed away, you can collect a reduced divorcee widows benefit starting at 60 (and at 50 if you are disabled and meet Social Security’s requirements) and wait until 70 to collect your own retirement benefit. This may or may not be the right thing to do depending on: a) your own work record compared with that of your first ex’s; b) whether your ex took his retirement benefit early; and c) your maximum age of life. Expert commercial software can help you decide whether to take your own retirement benefit or your divorcee widows benefit first. If your first ex is still alive, you can collect a divorcee spousal benefit on his work record as early as age 62. But if you do qualify to collect a divorcee spousal benefit (because he’s over 62), you’ll be forced, due to Social Security’s deeming rules, to take you own retirement benefit early, and your divorcee spousal benefit will actually be what they call your excess divorcee spousal benefit. This is the multiplication of a) the difference between half your ex’s full retirement benefit and 100 percent of your full retirement benefit and b) a reduction factor due to the fact that you are taking your excess divorcee spousal benefit before full retirement age. This excess divorcee spousal benefit could be negative, in which case it is set to zero. That is, by trying to receive a divorcee spousal benefit early (before full retirement age), you can end up with a permanently reduce retirement benefit and nothing else!
You can flip from collecting or trying to collect on one ex-spouse’s work record to collecting or trying on the other ex-spouse’s work record and then flip back again. For example, if your first ex is alive and the higher earner of the two, and you had, let’s assume, no work record of your own, you could collect a reduced divorcee spousal benefit on him (if he’s over 62) when you reach 62. Then, if the second ex dies after you’ve reached full retirement age, you could collect an unreduced divorcee widow’s benefit on the second ex if it exceed the reduced divorcee spousal benefit based on the first ex’s work record. Finally, when the first ex dies, you can collect a non-reduced divorcee widow’s benefit based on that first ex’s work record. This could work, because divorcee widows benefit formula is more generous than the divorce spousal benefit formula.
To sum up, you can’t collect more than one benefit at a time. But depending on what benefit you can collect from them at the time you flip, you can flip from collecting on one ex to the other ex and then to the first ex again.
Kathryn – Garden City, Mich.: I am five years older than my husband. I am also the higher wage earner. I am currently 65, and he is 60. I was planning on quitting work and pulling Social Security benefits at age 66, and my husband would do so at 62, but after hearing about spousal benefits, I was wondering how we can maximize our benefits. I don’t want to work past age 66, but he wouldn’t mind working part-time from age 62 to 66. Thanks for any help you can provide.
Larry Kotlikoff: Your best move is likely to wait until 70 to collect your highest possible retirement benefit, have your husband collect just his spousal benefit starting at full retirement age and then have him collect his own retirement benefit at 70.
Yes, you could have him take his retirement benefit at 62, which will let you collect half of his full retirement benefit starting at 67. Under this Start-Stop-Start strategy, you’d collect your own retirement benefit at 70. And your husband would suspend his retirement benefit at full retirement age and restart it at age 70. This suspension would raise his reduced retirement benefit by 32 percent.
This second strategy is, however, likely to produce lower benefits than the first. But only expert commercial software that accounts for your maximum (not your expected) ages of life can say for sure. Your expected age of life isn’t relevant since you can’t count on dying on time.
Gerald – Kodak, Tenn.: How can I get proof from Social Security that they applied the extra earnings credit as listed in SSA Pub No. 05-100017 for my military service 1954 to 1979 to my Social Security payment each month? I have called, and they said it was applied, but they can’t send me proof. What is my next step? I figured $12,000 ($300 a quarter for 10 years) should have been added to my income, but I can’t see it anywhere. You reply is greatly appreciated. Thank you.
Larry Kotlikoff: If you can get your military pay records, it should be an easy matter to determine from your Social Security earnings record whether you are being credited for your military service for which I sincerely thank you. If you can come up with those two sets of records, give a shout. I’ll have someone in my software company check things out.
Frank – Freeland, Wash.: My wife will be 62 this year, and I will be 64. She was the lower earner, and her own retirement benefit, even at age 70, would still be less than her spousal benefit based on my earnings. Our plan was for her to take her reduced retirement this year at age 62 and collect four years of that benefit. Then, when she is 66 and I am 68, I would file and suspend so she could take her full spousal benefit, and then I would take my full retirement benefit at age 70.
However, I’ve read elsewhere:
If you claim retirement or dependents benefits at any time before you reach full retirement age, that early claim permanently reduces those benefits by a small percentage each month (up to full retirement age). Many people don’t realize, though, that claiming either early retirement or early dependents benefits also permanently reduces that other benefit for you. You cannot claim your own early retirement benefits and then switch to full dependents benefits later based on your spouse’s earnings record, and you cannot claim early dependents benefits and then later switch to full retirement benefits on your own record. As soon as you claim a Social Security benefit early, the other one is also reduced by the same percentage.
This seems to conflict with item 34 in your “34 Social Security Secrets You Need to Know Now” article:
If you take your retirement benefit early and your spouse takes his/her retirement benefit any time that is a month or more after you take your retirement benefit, you will NOT be deemed, at that point (when your spouse starts collecting his/her retirement benefit) to be applying for a spousal benefit. In other words, you can, in this situation, wait until your full retirement age to start collecting your unreduced excess spousal benefit.
Am I misinterpreting one of these? It makes a big difference in whether our plan makes sense. Thanks!
Larry Kotlikoff: The first reference at nolo.com, which is about deeming (being forced to collect two benefits at once and then getting only the larger of the two), is, in part, misleading, incomplete and incorrect. I won’t take the time to fully explore the depth of its error. I’ll just focus on your case.
Your wife can file now. Her check will equal her own full retirement benefit reduced by 25 percent. She would be deemed to be also filing to collect a spousal benefit if you had already filed for your retirement benefit or filed for it at the same time as she filed for hers. In your case, since you are waiting until 68 to file for your retirement benefit (the fact that you will suspend it isn’t relevant to this issue), your wife won’t be deemed to be taking her spousal benefit at 62. When she reaches 66 and files, according to your plan, for her spousal benefit, her total check will equal the sum of A and B. A is her reduced retirement benefit and B is her unreduced excess spousal benefit (because she doesn’t get it before full retirement age). Her excess spousal benefit will be the difference between half of your full retirement benefit and 100 percent of her full retirement benefit.
This said, the real question is whether this is the best strategy. Her total check from age 66 on will be under what you have in mind than if she were to wait until 66 and file for her full spousal benefit, which will equal half of your full retirement benefit. If you do the math, her full spousal benefit from age 66 on equals her reduced retirement benefit plus her full (unreduced) excess spousal benefit.
What’s optimal here in terms of maximizing your combined lifetime Social Security benefits depends on both your wife’s and your maximum age of life and what equally sure return you can get by investing in the market. If you run highly-expert commercial software, you can quickly see what you may be giving up in terms of lifetime benefits based on your proposed strategy.
Laurence Kotlikoff is a William Fairfield Warren Professor at Boston University, a Professor of Economics at Boston University, a Fellow of the American Academy of Arts and Sciences, a Fellow of the Econometric Society, a Research Associate of the National Bureau of Economic Research, President of Economic Security Planning, Inc., a company specializing in financial planning software, and the Director of the Fiscal Analysis Center. Kotlikoff's columns and blogs have appeared in The New York Times, The Wall Street Journal, The Financial Times, the Boston Globe, Bloomberg, Forbes, Vox, The Economist, Yahoo.com, Huffington Post and other major publications.
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