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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.
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. Find a complete list of his columns here. 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.
Duncan Smith — Eugene, Ore.: I have recently become disabled and am receiving Social Security disability benefits (SSDI). I have an adult daughter with Down Syndrome who receives $721 in Supplemental Security Income (SSI) payments. Now I have been told that since she is my daughter, instead of SSI, she will have to get SSDI payments based on what I receive.
Although this is a little bit more than her SSI, she will lose her current benefits from Section 8 (housing vouchers) and the Supplemental Nutrition Assistance Program (SNAP) and actually come out negative, compared to if she just received her SSI amount.
The Social Security office says she has to take SSDI, and if she does not want that, then she will have nothing, not even SSI anymore. Is this correct? She lives independently in her own apartment and is not supported by me.
Larry Kotlikoff: I’m turning this answer over to Jerry Lutz, the former Social Security technical expert who reviews each week’s Q+As.
Jerry Lutz: Duncan’s situation happens quite frequently. Since SSI is not an earned benefit, recipients are required to apply for all other types of benefits for which they may be eligible, including Social Security. So, Duncan’s daughter cannot elect to pass up Social Security benefits and remain eligible for SSI. Each state has their own criteria for determining eligibility for Medicaid, housing assistance, food stamps, etc. I just googled Oregon’s monthly income cutoff for Medicaid eligibility, and it looks like it is $1,273. Assuming that’s accurate, Duncan’s daughter should continue to be eligible for some types of public assistance, as long as her Social Security benefit doesn’t exceed that amount.
Sandra — Santa Fe, N.M.: If you continue to work after full retirement age (66) while collecting your Social Security benefits, is your AIME recalculated to include earnings each year that you continue to work?
Larry Kotlikoff: Yes, Sandra. Every year you work can, potentially, raise your Social Security benefits. If, for example, you could keep working to age 100, your Average Indexed Monthly Earnings (AIME) that’s plugged into Social Security’s Primary Insurance Amount (PIA) formula to calculate your retirement will be recomputed each year right up through age 100.
As I described in “How Social Security Pays You to Work Forever,” if your earnings remain above Social Security’s ceiling on taxable earnings, your AIME, and thus your PIA, will rise every year.
As a result, all the beneficiaries from your work record — your own retirement benefit, the spousal benefits of your current and any ex-wives (if you were married for 10 or more years to them), your children if they are young (under age 16) or disabled (having first been disabled before age 22), as well as your survivors when you die — will receive higher benefits. In addition, the family benefit maximum, which depends on your PIA, will go up.
So keep earning those big bucks! But, if you are earning small bucks, contributing to Social Security may not mean any higher benefits because even though your AIME is still recomputed, it may not change because your prior 35 years of highest indexed annual earnings remain the same 35 years.
The best way to sort out what more you’ll get back from Social Security (in terms of higher benefits) as a result of working longer is to run yourself through a careful Social Security software program where you can plug in your projected future covered earnings.
Larry Kotlikoff: If you are desperate for the money, you may have no option. But otherwise, the best strategy will likely be for you both to wait until 70 to collect your retirement benefit and have you take just your spousal benefit when you reach full retirement age — age 66-and-one-half in your case.
Sylvia — Fairfield, Calif.: I am disabled and 55 years old. My husband passed away 11 years ago. He paid into Social Security but had a state job for 20 years.
I receive my and his disability retirement from our employer. I was told by friends that I cannot receive his Social Security because of my income from our retirements. Is this true? So his Social Security just goes away because he passed away? Social Security told me that I did not pay into enough quarters to receive disability retirement for mine. Are these correct answers to my issues?
Larry Kotlikoff: If your husband had 40 quarters of coverage in jobs from which Social Security taxes were withheld, you should be able to collect a survivor benefit. They are available as of age 50 for disabled spouses. So I’d go back to Social Security and check on this.
If you don’t have enough quarters to be eligible for Social Security disability insurance, you probably worked in non-covered employment. If the disability payments you receive are from a government (federal, state or local) employer, your potential Social Security widow’s benefits may be fully offset.
Larry Kotlikoff: There are different options to consider, and only a first-rate software program can tell you which is best. One option is for your husband and you both to wait until 70 to collect your retirement benefit. Your husband would collect a full spousal benefit between full retirement age and 70.
Another option is for your husband to file for his retirement benefit before full retirement age, specifically when you reach age 66, thereby permitting you to collect a full spousal benefit and wait until 70 to collect your retirement benefit at its highest possible value. Under this second option, your husband could suspend his retirement benefit starting at full retirement age and start it up again at 70 at a 32 higher value than when he stopped it.
Kathy — Pittsburgh, Penn.: I am 68 years old and still working. I plan to work until 70 and then start collecting my Social Security. Recently my spouse passed away. He was 68 and was collecting his Social Security. I was told that I could collect his Social Security now. I intend to keep working and paying into my own Social Security.
If I were to collect his Social Security at this time, would it affect the Social Security I am to receive at age 70? I know what I will receive at 70 is more than his benefit at this time. I do not want to start on his if it will affect mine at age 70.
Larry Kotlikoff: Very sorry about your loss. Yes, start your survivor benefit immediately. It won’t reduce the retirement benefit that you’ll start taking at 70.
Trina — Des Moines, Iowa: I look after a family member who has been totally disabled since age 49. He is now 68. He received SSI at the start of his disability, and eventually began drawing his regular Social Security.
This gentleman was previously married more than 15 years. He has never remarried. His ex-wife is now 61. Is he entitled to any spousal benefits even though he is currently taking Social Security based on his own work history? Although he was the higher earner during the marriage, it is possible his ex had higher earnings in the ensuing years, but this is not known.
Larry Kotlikoff: Your family member should be able to collect an excess spousal benefit starting when his ex-wife reaches age 62. The excess spousal benefit may, however, equal zero since it’s computed as the difference between half his ex’s full retirement benefit less his current Social Security retirement benefit. If this difference is negative, it will be set to zero.
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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