Taxes

Ask Larry: Can I Suspend My Social Security Retirement Benefits And Switch To Spousal?

Today’s column addresses the possibility of suspending a retirement benefit to then get spousal benefits, when spousal benefits can be paid, suspending a benefit after receiving disability, potential merits of early filing and voluntarily paying into Social Security. 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.


Can I Suspend My Social Security Retirement Benefits And Switch To Spousal?

Hi Larry, I was born in 1955 and my wife was born in 1952. I am a 100% disabled veteran and was denied after two years of working with an attorney to be approved for Social Security disability. During this time my lawyer, who was confident that we would be approved, said I should start drawing on my regular Social Security retirement benefit at a reduced rate, which I did. I started drawing my reduced benefit in 2018. Am I able to suspend and draw on my wife’s social security? Or if not, what are my options to suspend or withdraw my benefits and wait until my full retirement age of 66 +2 months or possibly 70? I am not going to reapply for disability even though my lawyer said he would be happy to start a new case for me. Thanks, Peter

Hi Peter, You couldn’t suspend your own Social Security retirement benefits and draw spousal benefits instead. Since you were born prior to 1/2/1954, even if you hadn’t already filed for your retirement benefits, if you filed for spousal benefits you’d be deemed to also be filing for your own retirement benefits. The only way that you could qualify for any spousal benefits is if your wife’s primary insurance amount (PIA) is more than twice as much as your PIA. A person’s PIA is the amount they’re paid if they start drawing their retirement benefits at full retirement age (FRA).

Since you apparently started drawing your retirement benefits less than 12 months ago, you could withdraw your claim and reapply later. However, you would first be required to repay all of the benefits that you’ve already received. Or you could suspend your benefits starting at FRA in order to earn delayed retirement credits (DRC) and then resume them at a higher rate at age 70, but you’d still be stuck with the percentage reduction that you took for starting your benefits prior to FRA. You aren’t allowed to voluntarily suspend your benefits prior to FRA.

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


Can I File A Restricted Application For Spousal Benefits If My Wife Continues Working?

Hi Larry, I was born in 1951 my wife was born in 1956. Can I file a restricted application for spousal benefit if my wife continues to work full time and she does not file for her Social Security retirement benefit? She’s continuing to work and wouldn’t be able to get her benefit if she applied now. Thanks, Justin

Hi Justin, You couldn’t be paid any spousal benefits unless your wife files for her benefits and her earnings are low enough to permit payment of at least some benefits. Both her benefits and your spousal benefits would be subject to withholding based on Social Security’s earnings test.

For example, say that Mary claims her Social Security retirement benefits in January 2019 when she turns age 63. Mary’s primary insurance amount (PIA), equal to her full retirement age (FRA) rate, would be $2,000, but her reduced retirement rate is $1,566. Mary’s husband Bob hasn’t yet claimed his retirement benefits and is already over FRA when Mary files, so he’s eligible to claim spousal benefits without being deemed to file for his own retirement benefits since he was born prior to 1/2/1954. Bob’s spousal rate is $1,000, or 50% of Mary’s PIA.

However, Mary is still working and will earn $74,092 in 2019, so before any benefits can be paid Social Security must withhold $1 of the benefits payable on Mary’s record for each $2 that her 2019 earnings exceed $17,640. In Mary’s case, that would amount to $28,226 in benefits (i.e. ($74092 – $17640) / 2). So Social Security would need to withhold both Mary’s retirement benefits and Bob’s spousal benefits for 11 months (i.e. ($1,566 + $1,000) x 11 = $28,226), or from January though November 2019. However, both Mary and Bob could then be paid benefits for the month of December 2019. It sounds like you and your wife have numerous possible filing options to consider, so you should consider your options before deciding how to file. Best, Larry


Is Someone Who Received SSDI Eligible To Suspend Their Benefits After FRA And Receive DRCs?

Hi Larry, My husband began drawing SSDI in late 2015 at 63. A few months after he reached FRA, he requested that his Social Security payments be suspended in order to qualify for DRCs. When he did so, one agent at the local Social Security office informed him he was not eligible to earn DRCs. Another agent overheard the conversation and corrected the first agent, so his Social Security payments are currently suspended. We have since read in a newspaper column that anyone who has been on disability is not eligible to earn DRCs. I have also read that on some websites.

Is someone who has been a SSDI recipient eligible to suspend their Social Security payments after they reach FRA in order to receive DRCs? If he did not qualify to receive DRCs, would his application to suspend have been turned down? Is there any way to be sure that he is receiving DRCs? We don’t want to find out at 70 that he has not received DRCs and we are out a lot of money by having suspended payments for almost four years just to receive no increase. Thanks, Patti

Hi Patti, Yes, a person who previously received Social Security disability (SSDI) benefits can absolutely earn delayed retirement credits (DRCs) between full retirement age (FRA) and 70 by voluntarily suspending their benefits.

Anyone entitled to Social Security retirement benefits between FRA and age 70 is allowed to suspend their benefits and earn DRCs. That’s true even if they previously received SSDI or reduced Social Security retirement benefits prior to FRA. Furthermore, people who are eligible for Social Security retirement benefits but haven’t yet applied for them earn DRCs for any months that they delay receiving benefits between FRA and age 70. In other words, it isn’t necessary for a person to file for and suspend their benefits in order to earn DRCs. By the way, DRCs increase a person’s retirement benefit rate by 2/3rds of 1% for each month that they aren’t paid benefits between FRA and 70. Best, Larry


Am I Correct About How Our Benefits Would Be Calculated?

Hi Larry, I am 54 with a forecast PIA of $2,500 at FRA and my wife is 62 with forecast PIA of $500 at FRA. My thought is that there would be little downside for the older, lower PIA already retired worker to claim early now, and for the younger person with higher PIA continue to work and not claim till 70. Am I correct in my take that the reduction in benefits if claimed now would reduce the 62 yr old to about $375 but when the 54 year old reaches FRA, the spousal benefit would be $1,250 less the $500 FRA amount plus the $375 individual benefit or $1125? Thanks, Jake

Hi Jake, Yes, it sounds like you understand the benefit computations that would be involved in the scenario you present, but only you and your wife can actually decide which filing strategy is best for you. But the downside in filing early is that your wife’s spousal benefits will always be reduced due to filing early. Best, Larry


Should We Pay Into Social Security To Increase Our Benefits If We’re Working In Japan?

Hi Larry, my husband and I have been living and working in Japan for a number of years. We qualify for Social Security benefits based on our earlier employment in the US. We are now looking towards retirement but still in Japan and working and our salaries here are much higher here. Does it make sense to pay into Social Security in these last few years of work to increase our Social Security benefits. Working outside of the country, we did not pay Social Security but, of course, pay all other US taxes and Japan taxes. Thanks, Anne

Hi Anne, You aren’t allowed to voluntarily pay Social Security taxes in order to qualify for benefits or boost your benefit rate. Social Security taxes are only collected on wages paid by employers subject to US Social Security taxes, and on net earnings from self-employment which are subject to U.S. self-employment taxes. I don’t have enough information about your current employment to know for sure, but I doubt if your work in Japan would be subject to U.S. Social Security taxes. Best, Larry


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