Will Social Security count my big earnings if I lose my job before 66?

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 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: I have worked all my life and made big bucks. I recently lost my job and am almost 61 years old. My husband is already on Social Security but I will get more than he does. I am worried about how much I will lose if I cannot get a job until I am age 66? They will not calculate going forward — just what it says now. I think it will decrease but is there a percentage?


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Larry Kotlikoff: You won’t lose benefits if you don’t work and contribute more to the Social Security system. What you will lose is the potential ability to raise your annual and, thus, you lifetime benefits based on Social Security’s Re-computation of Benefits​. This provision raises your benefits if your earnings in the past year exceeded the lowest of your 35 past highest covered earnings after those earnings prior to age 60 have been indexed upward due to economy-wide real wage growth.

As I’ve written before, if you earn above the covered earnings ceiling, you will definitely replace the lowest of your past highest 35 years of covered earnings with your current earnings. So if you are, as you say, a high earner, you should consider how much more in benefits you’ll receive from working. There is inexpensive commercial software that can make these calculations. Apart from working and earning more, you should opt to take just your spousal benefit at full retirement age and your own retirement benefit at age 70. This will maximize your lifetime benefits.

Camillo — Italy: I was deported from the United States in 2007 after 45 years of being a permanent resident. Okay, I made a few mistakes. Now I’m 66 years old and would like to get my pension from Social Security. How do I go about doing that? Am I entitled to it?

Larry Kotlikoff: Camillo, I’m sorry to tell you this, but deportees cannot be paid Social Security benefits unless they are re-admitted to the U.S. for permanent residency. Here is a reference from Social Security’s manual.

Katy — Calif.: Larry, thanks for all the great information. My spouse is 57 and collects Social Security disability. He became disabled five years ago. He also receives a small retirement benefit from the county, which was set up as a pension trust. We do not anticipate him being able to work again in his lifetime.

I am turning 62 this year, and retired from the CSU system with a disability retirement in 1997. I have been receiving retirement benefits from the state as a result of an employment injury. I was able to be retrained into another occupation, and now work full time with a private company. The company I am with has set up an ESOP, and I will be fully vested by the time I intend to retire at age 70. Both my spouse and I have worked enough years to earn full credits with the Social Security system and have been married for 20 years. There must be a few strategies we would be wise to consider, and I don’t think it is too early to start thinking about them. I appreciate your time.

Larry Kotlikoff: You can file just for a spousal benefit when you reach full retirement age and wait until 70 to collect your own retirement benefit. Your husband can withdraw the automatic conversion of his disability benefit into his retirement benefit. This, by the way, does not entail his withdrawing his disability benefit. Nor does it entail suspending his retirement benefit. Rather it’s withdrawing the conversion of the disability benefit into a retirement benefit when he reaches full retirement age.

Having done this, your husband can file just for his spousal benefit at full retirement age, given that you will have filed for your own retirement benefit by this point. At 70, your husband would file for his retirement benefit. It will equal his current disability check bumped up by roughly 28 percent to account for the delayed retirement credits he will accumulate by waiting to collect.

Jean — N.C.: My husband passed away when I was 60 years old. I was not working that much when he died. I started taking my survivor benefits then, and still do. Can I take my own benefits at 70?

Larry Kotlikoff: Very sorry for your loss. Social Security won’t pay you two benefits at once. Instead it will pay the larger of the ​two benefits. If your retirement benefit at 70 exceeds your widows benefit (which doesn’t sound very likely), your monthly check will rise and equal your retirement benefit.

Question: I am retired. I am drawing Social Security. I can only make a certain amount without penalty. I retired in May. My question is, at what point during the first year does that income amount start? How much can I make after retiring? I have already earned more than allowed this year before retiring. Does that limit start from my retirement date? Or have I already maxed out for this current year?

Larry Kotlikoff: Please check out this column,
“Retiring? Here’s how to get an extra month of Social Security benefits for free” for a detailed answer to your actually quite complicated question.