Ask Larry: Will Social Security Recalculate And Possibly Increase My Benefit If I Work At 72?

Today’s column addresses whether Social Security benefits are recalculated due to continued employment, public pensions and divorced spousal benefits, how divorced spousal benefits are calculated, when spousal benefits are available and foreign pensions. 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 Social Security Recalculate And Possibly Increase My Benefit If I Work At 72?

Hi Larry, I stopped working when I filed at 68 when I began receiving my Social Security retirement benefit. I’m thinking of returning to work, possibly part time or maybe full time. I know the earnings test will no longer affect me since I’m past 66 but could my benefits still be recalculate and possibly increased if I do go back to work? Thanks, Marc

Hi Marc, Yes, your Social Security retirement benefits can be recalculated to include higher earnings years regardless of your age at the time you have the earnings. In order for your benefit rate to increase, though, your earnings in a year would need to be higher than one of your previous 35 highest wage-indexed earnings years used to calculate your current benefit rate.

Social Security automatically recalculates benefit rates for people who are already receiving benefits and who have additional earnings which are high enough to raise their benefit amount, so you don’t need to do anything to get any benefit increases for which you may be eligible. However, you can sometimes speed up the process by submitting proof of your most recent year of earnings (e.g. W-2 forms, tax returns) and requesting a manual recomputation. Best, Larry

Will My Divorced Widow’s Benefits Be Impacted By My Pension From The School System?

Hi Larry, I am planning to take divorced widow’s benefits at 60 and then my own retirement benefit at 70. At 65, I also have a minuscule pension from the school system I worked for briefly when I paid into PERA and not into Social Security. I understand my own retirement benefit at 70 will be affected by the WEP but by no more than 50% of my pension amount. I have less than 20 years of substantial earnings. My deceased ex-spouse never worked for any employer that did not withhold Social Security tax.

Will my divorced widow’s benefit be impacted by my pension at all? If I took a lumps um payment at 65, would there be any impact on my retirement benefits at 70 or widow’s benefit before that? Also, my divorced widow’s benefit has an FRA of 66 years and 6 months while my retirement FRA is 66 years and 10 months. What is the age at which the earnings test will no longer apply — my widow’s FRA or my retirement FRA? Thanks, Cindy

Hi Cindy, Yes, it sounds like your surviving divorced spousal benefits will likely be offset by 2/3rds of the gross amount of your pension from the school system due to the Government Pension Offset (GPO) provision. No offset will apply until you actually start drawing the pension, though.

The GPO would still apply to your survivor benefits and the Windfall Elimination Provision (WEP) would still apply to your own Social Security retirement benefits if you took a lump sum in lieu of a pension. Social Security would prorate your lump sum into a monthly rate, which they would then use to calculate the offset amount.

The Social Security earnings test continues to apply until the month you reach your full retirement age (FRA) for Social Security retirement benefits, even if your FRA for surviving divorced spousal is four months earlier and you’re drawing survivor benefits. So, if you were born in 1959 the earnings test will continue to apply until you reach age 66 & 10 months. Both of my company’s two tools — Maximize My Social Security or MaxiFi Planner — are fully programmed to handle cases involving both WEP and GPO, so you may want to strongly consider using the software to help you with your Social Security planning. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

What Are My Options For Collecting Auxiliary Benefits Now?

Hi Larry, I was born in 1956. I have been divorced after being married over 10 years and I am unmarried. My ex is 63 and has been on SSDI. What are my options for collecting auxiliary benefits now versus waiting until full retirement, and how does each choice effect benefits in the present and going forward? What happens in either case to the auxilary benefit if I wait to collect at 70? What happens to my auxiliary benefit if she does the same when she turns 65? Thanks, Hal

Hi Hal, Since you were born after 1/1/1954, when you apply for either retirement benefits on your own record or for divorced spousal benefits, you’ll be deemed to be filing for both. You can only be paid essentially the higher of the two benefit rates, and your benefit rate will be reduced for age if you start drawing prior to your full retirement age (FRA).

You won’t qualify for divorced spousal benefits if your own unreduced Social Security retirement benefit rate (i.e. your primary insurance amount, or PIA) is higher than 50% of your ex’s PIA. And if your ex’s PIA is more than 50% of your PIA, she won’t be able to qualify for divorced spousal benefits on your record. If either of you do qualify for divorced spousal benefits, you wouldn’t want to wait past FRA to claim them since divorced spousal benefit rates don’t increase if you wait past FRA to claim them. Best, Larry

Can I Get A Spousal Benefit If I’m Still Working And Separated From My Husband?

Hi Larry, I will be 66 this month and I am still working and not ready to retire yet. I plan to keep working for the next couple years and don’t want to apply for Social Security until I am ready to retire. My husband is 68 years old and retired last year and is collecting Social Security. We have been married for 32 years but have been separated for the last two years now. Divorce is in the future but I don’t want to pursue that yet until I figure out my rights for spousal benefits. Can I get a spousal benefit from him if I am still working and still married but separated from him? From what I have read and understand, if we were to get divorced before I start receiving spousal benefits then I would have to wait for two years after the divorce. Am I correct? If we decide to get divorce after I start collecting the spousal benefits, what happens to my spousal benefit? Does it change? I want to be able to collect spousal benefit if I am eligible until I retire or remarry. I have an appointment with SSA next month and want to know the facts and my rights before I go. Thanks, Claire

Hi Claire, Yes, you can potentially qualify for spousal benefits even if you’re separated from your spouse. And, since you were born prior to 1/2/1954 and your husband is drawing his benefits, you could file just for spousal benefits only starting with the month you reach full retirement age (FRA) while allowing your own retirement benefit rate to grow until 70. There is no limit on the amount that you can earn and still draw benefits once you reach FRA.

If you start out drawing spousal benefits and you later get divorced, your benefits would continue as a divorced spouse as long as your marriage lasted for at least 10 years and as long as you don’t remarry. If you divorce prior to filing for spousal benefits, you would not have to wait 2 years to claim divorced spousal benefits as long as your husband is already drawing his benefits. Changing from spousal to divorced spousal benefits wouldn’t change your benefit rate. Best, Larry

When I Retire, Will My Wife Be Able To Receive Spousal Benefits?

Hi Larry, My wife is 66 and retired and is collecting US social security. She has worked in the US for the last 12 years. She worked in Poland for at least 30 years before coming here in 2006 and receives Poland’s Social Security benefits starting six years ago. We do not receive her pension here in the states, it all goes to a bank in Poland. Her US benefits have been reduced by the WEP. I will be retiring next year. I am a US citizen and have worked over 40 years. Can she get spousal benefits based on my work once I retire? Thanks, Carlos

Hi Carlos, Assuming that 50% of your full retirement age rate, or primary insurance amount (PIA), is more than your wife’s PIA, then she should qualify for a partial spousal benefit when you start drawing your benefits. She won’t necessarily end up with exactly 50% of your benefit rate, though.

The amount of your wife’s unreduced spousal benefit would be calculated by subtracting her PIA from 50% of your PIA. That would then be added to her own Social Security retirement benefit rate, so any reduction for age that she took to start drawing her benefits early would continue. Therefore, the only way that your wife would get a full 50% of your PIA would be if she didn’t start drawing her own benefits prior to her full retirement age (FRA). Your wife’s Polish pension won’t have any effect on her Social Security spousal benefits. Best, Larry

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