Today’s column addresses whether dividends and interest are subject to the Social Security earnings test, spousal benefits before retirement benefits, public pensions and restricted applications, retirement benefits before spousal benefits and restating after suspending a retirement benefit. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc, a company that markets Maximize My Social Security and MaxiFi Planner.
See more Ask Larry answers here.
Ask Larry about Social Security here.
Will Dividends And Interest Reduce My Social Security Benefits?
Hi Larry, I understand if I continue to work past 62, the employment income will negatively impact my monthly Social Security benefit. Will dividends and interest from stocks and mutual funds negatively impact my benefit as well? Also, should I delay 401K withdrawals as long as possible? Thanks, Keith
Hi Keith, The only type of income that counts for purposes of the Social Security earnings test is earnings from either gross wages or net earnings from self-employment. I’m not a financial advisor but if you’re thinking about drawing your Social Security benefits at age 62 in order to delay making 401K withdrawals, you may be doing things backward. You can read more here. Best, Larry
Can I Claim A Spousal Benefit Now And Switch To My Own Record At FRA?
Hi Larry, My wife claimed her retirement benefit at 62. She is now 67 and I’m 64 and still working full time. I plan to claim my retirement benefit at my FRA of 66 and 2 months. Can I claim a spousal benefit now on my wife’s SSA record and then switch to my own record at FRA? Thanks, Al
Hi Al, Since you were born after 1/1/1954, you would be deemed to be filing for your own Social Security retirement benefits when and if you apply for spousal benefits. You would then be paid only essentially the higher of those two benefit rates, and your benefit amount would be reduced for age if you start drawing prior to your full retirement age (FRA). Even if you had been born before 1/2/1954, though, you couldn’t file for spousal benefits prior to FRA without also being deemed to have applied for your own retirement benefits at the same time.
You may want to use one of my company’s two tools — Maximize My Social Security or MaxiFi Planner — to fully explore and compare all of your various options in order to determine which filing strategy would likely best serve your family’s needs. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry
Does Having A CSRS Pension Affect My Eligibility To File A Restricted Application For Spousal Benefits?
Hi Larry, Does having a Federal CSRS retirement pension and being subject to WEP affect my eligibility to file a restricted application for spousal benefits? Thanks, Cassie
Hi Cassie, It does not, but any spousal benefits for which you otherwise qualify would likely be offset by 2/3rds of the gross amount of your Civil Service Retirement System (CSRS) pension. That type of offset is caused by the Government Pension Offset (GPO) provision. Best, Larry
How Would My Future Spousal Benefit Be Calculated If I Take My Retirement Benefits Now?
Hi Larry, I was born in 1955. I know I am under the new law deeming that I apply for all my benefits. But I am unclear about my spousal benefits if I take my retirement now and my spouse is still working. My spousal benefit would be higher than my retirement benefit. Thanks, Jim
Hi Jim, If you file for your Social Security retirement benefits before you’re first eligible for spousal benefits, you will be deemed to have filed for spousal benefits effective with your spouse’s initial month of entitlement to either Social Security retirement or disability benefits. Any reduction for age applicable to either benefit would be calculated independently based on your age at the time you first became entitled to that benefit. Best, Larry
Will Social Security Start My Husband’s Benefits Automatically At Age 70, Or Does He Need To Do Something?
Hi Larry, My 69 year old husband filed and suspended and I started collecting my spousal benefit when I turned 66. He will be 70 November 30. Does he have to notify the Social Security office or will his benefits begin automatically at 70? Is there anything specific he needs to do? Thanks, Jill
Hi Jill, Since your husband has already applied for his benefits, Social Security should automatically reinstate his benefits effective with the month he reaches 70 with no action on his part being necessary. If you’re not sure that Social Security has your husband’s correct bank information for direct deposit, you may want to check with them well in advance of his first payment. Due to the fact that your husband was born on November 30, his benefit payments will almost certainly be scheduled to start on the 4th Wednesday in December. Best, Larry