Ask Larry: Why Shouldn’t I Take Retirement Benefits At 62 Before Divorced Spousal At FRA?

Today’s column addresses potential drawbacks to taking early retirement benefits before switching to spousal, claiming retroactive benefits after 70, finding out if an ex is drawing on a worker’s record, retroactive child-in-care spousal benefits and whether a settlement is taxed by SSA.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.

Why Shouldn’t I Take Retirement Benefits At 62 Before Divorced Spousal At FRA?

HI Larry, Upon reaching my FRA at 67, I will be claiming my Social Security divorced spousal benefits on my ex’s work record. However, do I have the option of claiming early retirement benefits at 62 on my own work record, before jumping to my divorced spousal benefits when I reach FRA? What, if any, downside might there be to this strategy? Thanks, Amit

Hi Amit, The potential downside of your strategy would be that you would continue to receive a reduced benefit rate for as long as both you and your ex-spouse is living. Once you file for your own Social Security retirement benefits you can’t later switch to drawing another type of benefit, although you could potentially file for additional benefits on another person’s record.

Furthermore, if you file for your own benefits at 62, you’ll be deemed to also be filing for divorced spousal benefits. So you couldn’t then choose to wait until FRA to claim divorced spousal benefits. Your divorced spousal benefits would start either at the same time you claim your own benefits, or as soon after that as you qualify for divorced spousal benefits. And if that’s before you reach FRA, both your own retirement benefits and your divorced spousal benefits would be reduced for age.

However, if your ex is deceased, then deeming would not apply and your optional strategy would likely be different. 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

If A Person Files A Couple Months After Turning Age 70, Can They Still Claim Six Months Of Retroactive Benefits?

Hi Larry, If a person misses filing at age 70 by a couple months, can they still file for the six months of retroactive benefits? The local SSA office is saying it is illegal to pay retroactive benefits after reaching 70. Is this true? Thanks, Lucia

Hi Lucia, If a person hasn’t yet filed for their benefits and they are past 70, they can still claim benefits retroactively for up to six months prior to their month of filing.

However, if a person previously filed for their benefits and then voluntarily suspended them after April 29 2016, they can’t reinstate their payments any earlier than the month after the month that they request reinstatement. If a person’s benefits are in suspense when they reach 70, Social Security automatically reinstates their benefits effective with the month they reach 70. Such a person could not subsequently request to have their benefits reinstated for any months prior to the month that they reached 70. Best, Larry

Can I Find Out If My Ex-Wife Is Drawing Social Security From My Employment Record?

Hi Larry: Is there any way that I can find out if my ex-wife is drawing Social Security divorced spousal benefits from my employment record without asking her directly? She is perfectly entitled to them as far as I’m concerned so that’s not an issue. Can I ask Social Security for this information since it is my employment record? Thanks, Taylor

Hi Taylor, Yes. Social Security can’t give you personal information about people receiving benefits on your record such as their address, but they’re required to disclose to you the names of anyone receiving benefits based on your work record. Best, Larry

Can I Receive Retroactive Benefits As A Spouse From When My Children Were Under Age 16?

Hi Larry, My husband has is receiving Social Security disability. In 2012 I did not receive any income while my husband was on disability. Can I receive retroactive benefits as a spouse that I was entitled to that I did not apply for when our children where under 16? When my husband applied for Social Security, I did not realize I was eligible to receive benefits if I did not have any income in a particular year. Thanks, Samantha

Hi Samantha, You can’t claim Social Security child-in-care spousal benefits any farther back than six months prior to the month you apply for them. However, even if you were eligible for benefits when your children were under 16, claiming those benefits wouldn’t have increased your total family benefits. That’s because the maximum total amount that can be paid to family members on the record of a person receiving Social Security disability (SSDI) benefits is equal to 50% of the disabled worker’s SSDI rate. In other words, the family maximum benefits (FMB) can’t exceed 150% of the worker’s SSDI rate. So If more than one family member qualifies for auxiliary benefits at the same time, they just end up splitting the total amount available.

Based on your description, it sounds like if you would have filed for child in care spousal benefits any benefits that you would have been paid would have simply reduced your child(ren)’s benefits dollar for dollar. Best, Larry

Would The Proceeds Of A Settlement From My Former Employer Be Considered As Social Security Wages?

Hi Larry, I am 68 and not collecting Social Security now, but I do work. I’m waiting until 70 to collect. I may have a settlement coming to me from my former employer. I know that the settlement is taxable. But are the proceeds considered Social Security wages? Thanks, Ben

Hi Ben, That depends on what type of compensation is involved in the settlement. Only earned income, specifically wages or net earnings from self-employment, is subject to Social Security taxes. If the settlement you receive from your former employer involves back wages for services that you performed, then the employer should issue you a W-2 form and withhold any required Social Security taxes. Best, Larry

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