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.
I receive emails virtually every day from people who have been misled or misinformed, sometimes terribly, by Social Security. This generally involves particular staffers at Social Security telling people to do things they shouldn’t do, telling them they can’t collect benefits they absolutely can collect, refusing to help them suspend benefits when they are eligible to do so, or pushing them into one or more of Social Security’s benefit collection traps.
Admittedly, I’ve been hearing only from people worried they were misdirected by Social Security. But some of the cases coming through my inbox make me crazy. I’m also appalled by many of Social Security’s online statements, which, on their face and taken in isolation, are simply not true or are highly misleading.
Rather than simply fulminate, let me list 25 examples of such false or potentially false statements:
1. If you take your retirement benefit early, you can’t suspend your retirement benefit after reaching full retirement age and start it again at age 70 at a higher level.
NOT TRUE: You can suspend your benefit at any time between full retirement age and age 70 and you can restart it any time before age 70. Your retirement benefit will restart automatically at age 70 if you don’t restart it earlier unless Social Security screws up the automatic restart (which people tell me has happened to them).
2. If you marry a foreigner with children and you are their primary means of support, they can’t collect child benefits and your spouse can’t collect child-in-care spousal benefits.
NOT TRUE: The fact that your spouse is foreign doesn’t affect the children’s rights to benefits or your spouse’s right to child-in-care spousal benefits, provided that they are legally residing in the U.S.
3. If you get remarried before age 60 and then divorced, you cannot, after age 60, collect divorcee widow(er) benefits on your first ex to whom you were married for 10 or more years.
NOT TRUE: You can get divorced after age 60, file for your divorcee widow(er) benefit, and remarry your current spouse. This sounds quasi illegal, but as far as I know it’s perfectly legal. If you do this, make it clear to Social Security in writing that this is what you intend to do.
4) If you are disabled, you can’t suspend your retirement benefit (to which you disability benefit converts at full retirement age) upon reaching full retirement age and start it again at 70 at a higher level.
NOT TRUE: Disabled workers, upon reaching full retirement age, have their disability benefit automatically converted into their retirement benefit. And like any other worker who has filed for his/her retirement benefit, they can suspend it and restart it again at 70 at what is now a 32 percent higher value reflecting the addition to the benefit of delayed retirement credits.
5) Your ex-spouse to whom you were married for 10 or more years has to be over full retirement age for you to collect a divorcee spousal benefit.
NOT TRUE: No, your ex-spouse needs to be over 62 and you need a) to have been divorced for two or more years or b) your ex-spouse needs to have filed for his/her retirement benefit.
6) Older disabled children (who were disabled before age 22) of retired or deceased workers cannot collect on their retired or deceased parent’s work record.
NOT TRUE: Provided you can establish the child was disabled before reaching age 22 and remained disabled (as in didn’t earn too much money) after age 22, an unmarried child is eligible to collect child or child survivor benefits when a parent files for his or her retirement benefit or passes away.
7) A widow(er) or a divorced widow(er), who was married for 10 or more years, is over the age of 60, and is under full retirement age, cannot file for a widow(er) benefit if they are working regardless of how much they earn.
ABSOLUTELY NOT TRUE: You can file for your widow(er) or divorcee widow(er) benefit starting at age 60 and starting at age 50 if you are disabled. These benefits may be reduced if you take them before full retirement age. Also, some or all of the benefits may be withheld if you earn more than $15,720. And if you file for your retirement benefit or if you are deemed to have filed for your retirement benefit because you are receiving a disability benefit, your widow(er) or divorcee widow(er) benefit will be your excess widow(er) or excess widow(er) benefit.
8) You should consider your life expectancy in deciding when to take your benefits.
NOT TRUE: You can’t count on dying on time. The chances you will die exactly at your life expectancy are zero. The only relevant longevity measure to consider is your maximum age of life—the oldest age to which you can possibly live. For most of us, that’s probably 100.
9) You can use Social Security’s online benefit calculators to accurately forecast your retirement benefit.
NOT TRUE: Social Security’s online calculators assume economy-wide average wage growth and that inflation will be zero in our country from now until the end of time. It would be hard to conjure a more unrealistic assumption about the economy’s future path for wages or inflation. In addition, Social Security’s online calculators assume that you will continue earning at your current level through full retirement age, which may be far off the mark.
10) Social Security can’t and won’t tell you your ex-spouse’s full retirement benefit.
NOT TRUE: If you push them, Social Security will tell you what divorcee spousal benefit you will collect if you file just for your divorcee spousal benefit at full retirement age. This amount is half of your spouse’s full retirement benefit.
11) The more you contribute to Social Security, the higher your benefits.
NOT NECESSARILY TRUE: If extra covered earnings don’t raise your Average Indexed Monthly Earnings or if you end up solely collecting spousal and widow(er) or divorcee spousal and divorcee widow(er) benefits on your spouse or ex-spouse, extra money contributed to Social Security will produce absolutely no extra benefits to you.
12) You can take spousal or divorcee spousal benefits early.
NOT NECESSARILY TRUE: You can’t file for either a spousal benefit or an excess spousal benefit until your spouse files for her/his retirement benefit. And you can’t take your divorcee spousal benefit or divorcee excess spousal benefit until your ex reaches 62 and either a) files for his/her retirement benefit or b) you have been divorced for two or more years.
13) Benefits lost due to the earnings test will be recouped via higher benefits starting at full retirement age.
NOT NECESSARILY TRUE: If you flip from benefit, X, which has been reduced by the earnings test, onto a different and higher benefit, Y, at or after full retirement age, the fact that X is reset to a higher benefit due to the adjustment of the reduction factor won’t help you because you’ll be collecting Y, not X.
14) If you wait until age 70 to collect your retirement benefit you will get all your delayed retirement credits.
NOT NECESSARILY TRUE: The good folks at Social Security will, without your agreement, give you six-months retroactive benefits, which will reduce your benefit by 4 percent for the rest of your life. See my column about Social Security’s treatment of my dentist. To ensure you get your full delayed retirement credits, you need to have your retirement benefit begin or restart at age 70 and expressively tell Social Security, in writing, that you want no retroactive payment.
15) Disabled workers can collect auxiliary (spousal, divorced spousal, widow(er), or divorced widow(er)) benefits.
NOT NECESSARILY TRUE: Disabled workers are treated as having filed for their retirement benefits. This is true before and after they reach full retirement age, at which point their disability benefit is called their full retirement benefit. Filing for your retirement benefit means that you can never collect an auxiliary benefit by itself while letting your retirement benefit grow. Instead, your auxiliary benefit is transformed into your excess auxiliary benefit. Your excess auxiliary benefit is either exactly or close to the difference between your auxiliary benefit and your full or actual retirement benefit (even if you have suspended your retirement benefit). If this difference is negative, your excess auxiliary benefit is set to zero.
16) Your spousal or divorcee spousal benefit equals half of your spouse’s full retirement.
NOT NECESSARILY TRUE: If you have filed for your retirement benefit (even if you’ve suspended it), you’re spousal or divorcee spousal benefit becomes your excess spousal or excess divorcee spousal benefit, which can easily be zero.
17) Widow(er)s can collect widow(er)’s benefits on their deceased spouse’s work record or on their ex’s work record.
NOT NECESSARILY TRUE: If you have filed for your retirement benefit (even if you’ve suspended it), your widow(er) or divorcee widow(er) benefit becomes your excess widow(er) or excess divorcee widow(er) benefit, which can be zero.
18) Social Security doesn’t discriminate against the disabled.
NOT TRUE: Due to Social Security’s incredibly nasty 2014 Christmas present, the disabled cannot collect full spousal benefits between full retirement age and 70. This is something that one of two married spouses can do and that both ex-spouses from a marriage of 10 or more years can do. Disabled workers also can never collect full widow(er) benefits from their deceased former spouse or their deceased ex-spouse to whom they were married for 10 or more years.
19) Social Security is neutral to inflation.
NOT TRUE: After age 60, your annual nominal covered wages—with no adjustment for inflation or economy-wide real wage growth—are compared with your pre-age 60 covered wages that are indexed to inflation and economy-wide real wage growth in determining your AIME (average indexed monthly earnings). That in turn, determines your full retirement benefit and auxiliary benefits that current and former family members can collect on your work record.
20) If you take your widow(er)’s benefit early, they will be reduced.
NOT NECESSARILY TRUE: If your spouse or ex-spouse took their retirement benefit early, your widow(er)’s benefit is subject to a special and highly complex RIB-LIM formula.
21) Your divorcee Social Security benefits don’t depend on when your ex takes his/her retirement benefit.
NOT TRUE: Your divorcee widow’s benefit will, in general, depend on when your ex took his/her full retirement benefit.
22) If you get remarried before age 60 you can’t collect widow(er) benefits on the work record of your deceased ex-spouse.
NOT NECESSARILY TRUE: You are, it appears, free to get divorced, file for your divorcee widow(er) benefit, and then get remarried. I can’t absolutely swear this is possible or even legal, so you’ll need to check with Social Security and have them indicate in writing that there is no problem.
23) A child who is over 22 and was disabled before 22 can collect child benefits when his/her parent(s) file for retirement benefits and can collect child survivor benefits when his/her parent(s) die(s).
NOT NECESSARILY TRUE: If your child earns too much money for even a very short period of time, your child can be judged by Social Security to have not been continually disabled after age 22 and, therefore, disqualified for any child or child-survivor benefits. So be extremely careful about having your disabled child earn too much money perhaps via the generosity of a friend or a kind employer or because you are, illegally, trying to save taxes by paying your child rather than yourself out of your business’s income.
24) If you receive a pension from non-covered employment, the Windfall Elimination Provision—unless you have 30 years of substantial earnings—and Government Pension Offset Provisions will reduce your retirement benefit and the spousal or excess spousal benefits you receive on your spouse or former spouses’ work records.
NOT NECESSARILY TRUE: The Windfall Elimination Provision and Government Pension Offset provision only kick in when you start receiving your non-covered pension. If you can wait to collect a higher non-covered pension, it may behoove you to do so, because you can collect your Social Security benefits free of any losses due to the WEP or GPO until the point you start collecting the non-covered pension.
25) If you are the spouse with a child receiving a child benefit you can receive a child-in-care spousal benefit.
NOT NECESSARILY TRUE: If your child is in an institution and not directly in your care, you may not be eligible to receive a child-in-care spousal benefit.