Why You Should Wait Until 70

Photo by Tetra Images.

Social Security expert Larry Kotlikoff answers reader’s questions covering issues
from retirement, medicare and more.

_Larry Kotlikoff’s [Social Security original 34 “secrets”](http://www.pbs.org/
newshour/businessdesk/2012/07/social-security-secrets-you-ne.html), his [**additional
social-se.html), his Social Security [“mistakes”](http://www.pbs.org/newshour/businessdesk/2012/08/11-social-security-mistakes-pe.html) and his [**Social Security
security-gotchas.html) 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](http://
basic.esplanner.com/), for free, in its “basic” version._

Ted Arlinghaus — Edgewood, Ky.: I turn 62 on Aug. 31 and I earn $1,500 per month. Am I entitled to any benefits?

Larry Kotlikoff: This year, you can make $15,120 before you lose any benefits. For every dollar you make above this amount, you’ll lose 50 cents in benefits. BUT, don’t worry about that because when you reach full retirement age, Social Security will permanently raise your benefit, on an actuarial basis, in light of the benefits you lost before reaching full retirement.

The real problem in taking benefits early is not the earnings test. The real problem is that they will be MUCH lower than if you wait to collect them at or after full retirement age. For example, if you wait until age 70 to start collecting your retirement benefit, it will be up to 76 percent higher than the amount you’ll get taking them at age 62.

Lyinda Moore-Wilkes — Buffalo, N.Y.: I am divorced four years after 11 years of marriage to a civil service firefighter in New York State. We have a disabled child who lives with me. She receives Social Security (SSI).

At start of 2011, I was diagnosed with (long-term, incurable) mental illness disability and was placed on SSI. My ex phoned me recently to announce he has retired with disability, and that I should be commencing to receive about $900 per month from his retirement.

My question is: How should I handle this? Should I file for my own SSI retirement now that I am disabled, and postpone the spousal benefit under my ex?

Should I just apply for spousal benefit under my ex’s disability retirement? I am now 47. I read somewhere there is a substantial penalty for someone in my position to file for ex-spousal benefits in the same month or subsequent to an ex filing on their own behalf.

Larry Kotlikoff: I’m very sorry to hear about all the problems you have been and are facing. If your ex is over 62 and collecting disability, you’ll qualify for a mother’s benefit from Social Security. This may explain why he said you’ll be receiving $900 per month. This will continue until your child reaches age 16.

Your child should also receive child benefits from Social Security and, since your child is disabled, they will continue even beyond your child’s childhood.

At some point your child should also be able to collect child benefits on his own. You are entitled to collect spousal benefits as early as age 62 on your ex’s earnings record. And should he die, you’ll be entitled to collect survivor benefits on a widow (a widowed ex, really) starting as early as age 60.

But if he should die before you turn 60, you would still be able to collect survivor benefits, because you would have the deceased worker’s child in your care. These benefits would generally cease when your child reaches age 16, but because your child is disabled, they will continue past that age.

Marilyn Fishel — Tybee Island, Ga.: I am 65 years old and on Medicare. The Social Security office said I am to receive my husband’s SSI check. Since my husband died in 2002, will his SSI check remain the same if I take it at 66 or 70, or will it increase, even though he is not contributing to the system anymore?

Larry Kotlikoff: You should wait till you reach age 66 — your full retirement age — before taking your survivor benefit. It may behoove you to take your own retirement benefit now or wait to take it at 70, when it may be larger than your survivor benefit. You’ll get the larger of the two amounts. My company’s software, which costs $40, can help sort this out for you.

Rickie — Fairborn, Ohio: I have been separated for two years, and I need to know how to find out if my husband is getting a SSI check for our son.

Larry Kotlikoff: The Social Security office should tell you because it impacts what you can do with respect to taking your own retirement benefit. If your husband is collecting his retirement benefit and you are below full retirement age, you’ll be forced to apply for your spousal benefit as well as your retirement benefit if you apply before full retirement age for your retirement benefit.

But if he’s not collecting his retirement benefit, you can apply just for your retirement benefit and wait until full retirement age to collect your unreduced excess spousal benefit. Your excess spousal benefit is calculated as the difference between A. one half of your husband’s full retirement benefit, and B. your own full retirement benefit.

If you wait until full retirement age, you can apply just for your spousal benefit at which point it will equal not the excess spousal benefit but simply half of his full retirement benefit. Under this strategy, you can wait until 70 to take your own retirement benefit when it will be at its highest level.

In regards to your question about your son, if your husband is disabled or collecting his retirement benefit and your son is under 18, or under 19 and still attending elementary or high school, your son can collect child benefits. If your son is in your care, you can collect mother benefits until he reaches age 16.

Karen Holmgren — Oceanside, Calif.: I’m 69 years old, and I read on the Social Security Administration (SSA) website that when my former husband, who’s 80, dies, my benefit will be increased to 50 percent of his full benefit. I currently receive a small supplement based on his account.

However, he remarried and his wife is much younger. The SSA says that there is a monthly collection limit of between 150 and 180 percent of the deceased’s benefit amount. How would that affect me?

Larry Kotlikoff: You can collect 100 percent of the benefit he was receiving when he dies. The benefits you receive as a surviving divorcee will not, as far as I know, be affected by the family benefit maximum.

Richard — Excelsior Springs, Mo.: I am 66 years old. My wife will be 62 in a few months. When she accepts Social Security, will she get half of what I get?

Larry Kotlikoff: If she files for her spousal or her retirement benefit at 62, she’ll be forced to file for both benefits. Her total benefit will equal her reduced retirement benefit plus her reduced excess spousal benefit, where the excess spousal benefit is calculated as the difference between A. half of your full retirement benefit, and B. her full retirement benefit. If this difference is negative (if b exceeds a), she’ll get zero spousal benefit.

She may do better to wait until full retirement age to apply just for a spousal benefit, at which point it will be equal to one half of your full retirement benefit, and then, at 70, apply for her highest possible retirement benefit.

Ted — Cincinnati, Ohio: Does different income earned before retirement and paid after retirement count against your Social Security payment?

Larry Kotlikoff: Yes, Social Security recomputes your benefit each year in light of your ongoing earnings.

Jean Dillard — Martinez, Ga.: I am 72 years old and am drawing my full Social Security benefits while still working part time. I have $50,000 in my 401K. But, under my 401K guidelines, I can not receive any money until I retire. Is there a bank that accepts proof to defer some of this money until i retire so that I can continue to earn money?

Larry Kotlikoff: This cannot be correct. You have to, by law, initiate 401K withdrawals starting at age 70.

April Moore — Albany, Ga.: Can my husband’s first wife collect his SSI if he and I get a divorce?

Larry Kotlikoff: Yes, once you are divorced, what each of you can do doesn’t depend on what the other does.

Anonymous — Bolivar, Mo.: If I draw disability now, am I eligible to draw my spouse’s when he passes?

Larry Kotlikoff: Yes.

John Midmore — Valparaiso, Ind.: I started receiving Social Security benefits at age 66. Can I pay back this money and defer my payments. I am still working and earning $60,000 per year.

Larry Kotlikoff: You have a year to pay back and start from scratch. You may still be under the wire. Contact your local Social Security office.

John — Easton, Pa.: I am now 69 and still working. I started collecting Social Security benefits at age 66. I know if I had waited until age 70 to collect, I would get a higher payout. Is there anything I can do now to get the higher payout?

Larry Kotlikoff: If you start collecting before 70, the payment will be smaller than if you wait until 70. But you can go into the office and apply for your benefits and ask them to start them as of age 70 so they are at their largest possible value.

Mary — Duluth, Minn.: I am 58 and my husband is 55. I would like to know what you think about buying long-term care (LTC) insurance. My husband says we can pay for LTC from savings, but he fears we would run out of savings. How much savings would we need if, for instance, we lived until 90?

Larry Kotlikoff: Long-term care insurance can be very expensive, but very important. I’d shop around very carefully. You want to make sure the policy keeps up with the cost of nursing homes. Insurance companies are, in general, not to be trusted!

This entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman answers your economic and business questions

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