Social Security 101: Don’t count on dying on time

Social Security rules are complicated and change often. For the most recent “Ask Larry” columns, check out

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 of Maximizing Your Social Security Benefits,” (co-authored with Paul Solman and Making Sen$e Medicare columnist Phil Moeller) will be published in February by Simon & Schuster.

Question — Coon Rapids, Minn.: My wife, age 57, is receiving $394 per month in disability. If I begin benefits at $1,187 per month at age 63-and-a-half, will my wife’s benefit increase? I would continue to work and make about $40,000 per year. Would I file and suspend? My dad died at 78 and I can’t see outliving him. My wife doesn’t think she will see real old age, but her mother is almost 90 so I don’t know. What should I do?


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Larry Kotlikoff: ​Your wife can’t file for a spousal benefit until she is 62. Ignoring any inflation adjustment and assuming she files for her spousal benefit before full retirement age, her total benefit will equal the $394 plus her excess spousal benefit reduced for the fact that she’s taking her spousal benefit early. Her excess spousal benefit will be calculated as half of your full retirement benefit less 100 percent of her disability benefit. Careful software can calculate the exact amount.

Now what would I advise? I recommend you not count on dying on time. There is no guarantee this will happen. If you live to 100, you’ll be cursing yourself for taking benefits before age 70. Plus, if your wife waits until her full retirement age to collect a spousal benefit, her total check will equal half of your full retirement benefit. In order for her to collect her spousal benefit at full retirement age, you may need to file for your retirement benefit and suspend its collection assuming you are older than she is and are still under 70 when your wife reaches full retirement age.

Tom — San Francisco, Calif.: My wife and I are 62. She is retired and is entitled to only a few thousand dollars a year. I’m still working and my benefit is the maximum individual benefit. I plan to work until 66. Should my wife file for a spousal benefit now? Will it reduce either of our individual benefits when we reach 66? Thanks.

Larry Kotlikoff: You should, I believe, file for your retirement benefit at full retirement age and suspend its collection. Then at 70 you should restart your retirement benefit. Your wife should wait until she has reached her full retirement age and you have filed and suspended. Then she should file for her spousal benefit. It will equal half of your full retirement benefit.

​For your wife to collect a spousal benefit now, you would need to file for your retirement benefit. This would subject you to a permanent reduction. If your wife has already filed for her retirement benefit, her total benefit at full retirement age, if she waits until then to collect a spousal benefit, will be her permanently reduced retirement benefit plus her unreduced excess spousal benefit. If she has, indeed, started collecting, she can repay what she has received to date and then wait until full retirement age. At that point, she’ll receive half of your full retirement benefit as a spousal benefit.

Question: My husband died at 54. I went back to work after he became ill. I will apply for survivor benefits when I am 66. As he earned significantly more than me, it would not be beneficial to claim my benefits at age 70. I have two adult disabled children who get disability benefits based on my husband’s earnings. I was told that when I retire and we are all getting benefits based on his earnings, my benefits will be reduced. Is it possible for one of my children to get my Social Security money added to his amount so I will not be penalized and will be able to collect a higher amount from my husband?

Larry Kotlikoff: Very sorry for your loss. When you reach age 62 you should, I believe, file for your retirement benefit. If you aren’t earning too much such that the earnings test eliminates your retirement benefit entirely, you’ll collect some retirement benefits through full retirement age that you’d otherwise lose for no good reason.

When you file for your widow benefit at full retirement age or sooner, the family maximums​ (based on your husband’s and your own work records)​​ can be combined, which w​ill​ allow ​both you and your two children to receive ​survivor benefits​ unclipped by the family maximum on ​your husband’s work record.

Question — Broward Co., Fla.: I am fully vested and completed all required quarters into the Social Security system. After 36 years of employment, I am fortunate to be retired and receiving my monthly pension.

However, what I don’t understand is why after 36 years of service I must still wait to qualify until age 62 to apply for my Social Security benefits. To make matters worse — what’s with the 25 percent less penalty for filing at 62 instead of 66?

I am 58 years old and need to know if there’s any way possible that I can get my Social Security benefits before I reach the age of 62?

Larry Kotlikoff: Sorry, but there is no way to collect your retirement benefit earlier than at age 62. Also, be careful taking your benefit early. If you wait until 70, your retirement will be 76 percent higher after inflation. That’s one hell of a deal. Furthermore, if you are married or divorced (after being married for 10 years) you will, by taking your retirement benefit before full retirement age, forego your opportunity to collect a full spousal benefit between full retirement age and age 70. Moreover, taking benefits early will reduce dramatically the widow benefit your spouse could collect if you pass away first.

Mary — Dorr, Mich. My company is opting out Jan 1. 2015. I had hoped to work four and a half years to get full Social Security benefits. Can I work an additional part-time job somewhere, along with my regular opt-out job, and stay in Social Security? How much would I need to make? Could I then get a new job somewhere else, while doing this? Then quit my old non-covered job, and start right out contributing and not have to worry about waiting five years?

Larry Kotlikoff: In general, you need 40 quarters of covered earnings to qualify to collect Social Security retirement benefits. You can earn this coverage working as many jobs as you want. ​

In 2015, you receive one credit for each $1,220 of earnings, up to the maximum of four credits per year. ​So you could earn just $4,880 in, say, a week and nothing else and still be credited with four quarters of earnings. ​

Question: My question is a little complex. In 2004 I was diagnosed with a psychotic disorder. Because of this I applied for Social Security some time after that. Social Security said that I was disabled before my 21st birthday. So I became eligible to receive up to 50 percent of my stepmother’s Social Security. Her income is higher than my father’s income.

Because of my disability I have to have a guardian for my Social Security. I am able to function enough that I can work, but my income usually is limited to $1,000 per month. I was told that it may be difficult for me to sustain full-time work and jobs in high stress situations. I have not looked for another job because I am able to receive Medicare. This allows me access to doctors and medications that help manage my condition.

Is it possible to determine, based on current law, what would happen when I file for regular Social Security? I am assuming that I will stay below $1,000 per month. I am concerned that I may not receive any money from the retirement portion of Social Security because I was on the disability portion of Social Security. I am also concerned that I would be required to have a guardian for my Social Security retirement?

Larry Kotlikoff: Without knowing exactly what you are receiving, I can’t say if your own retirement benefit based on earning $12,000 per year will be above or below your child disability benefit. Furthermore, when your father passes, you’ll be able to collect 75 percent of his full retirement benefit as a survivor benefit. The same is true of your stepmother. You can’t collect more than one benefit at one time. Unless you are absolutely sure you’ll be able to earn a lot of money on a consistent basis you should be extremely careful about going off of disability. Doing so could cost you benefits for the rest of your life. Your full retirement benefit from earning $1,000 per month through age 65 will be just over $1,000 per month.