Taxes

Ask Larry: What Are The Risks For Me And My Wife If I File For Social Security Benefits At 62?

Today’s column addresses potential downsides of filing early to allow auxiliary benefits to be claimed on your record, public pensions and survivor’s benefits, eligibility for divorced spousal benefits, foreign pensions and suspicious calls claiming to be from 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.


What Are The Risks For Me And My Wife If I File For Social Security Benefits At 62?

Hi Larry, I plan on applying for Social Security benefits at 62 and also apply for child benefit for my son who will be 14. Is this the best strategy rather than waiting till my full retirement age of 67? What are the risks for me and for my wife who is eight years younger? My Social Security benefit at 62 is about $1875 vs $2800 at 67. Thanks, Jake

Hi Jake, The potential downside of starting your benefits early would be that you would then receive a lower monthly benefit for as long as you live and if you die before your wife, it would mean a lower potential widow’s rate for her. Furthermore, if you claim benefits at 62 and you are still working and earning more than the exempt amount allowed by the Social Security earnings test, both your benefits and any spousal or child benefits payable on your record would be subject to full or partial withholding. Best, Larry


Do You Have Any Idea How This Can Happen?

Hi Larry, I just spoke to my neighbor who lost her husband approximately 15 years ago. She is not getting her much needed Social Security benefits. She was denied her retirement benefit because she made too much money and she was a government employee. And she was denied her widow’s benefits because he worked for the city. I never heard of anything like this. He paid into Social Security for years. Any idea how this can happen? Best, Arnold

Hi Arnold, It sounds like your neighbor’s issue is the Government Pension Offset (GPO) provision. If a person receives a pension based on income from a governmental employer (e.g. federal, state, local) and their earnings were exempt from Social Security taxes, then any Social Security spousal or widow’s benefits for which the person would otherwise qualify would be offset by 2/3rds of the amount of their government pension.

Therefore, if your neighbor receives a government pension as described above and the amount of that pension is at least 1.5 times the amount of her potential widow’s benefit, then her widow’s benefits would be fully offset to zero unless she meets an exception to GPO. Best, Larry


Will My Ex Be Able To Claim A Divorced Spousal Benefit Even Though I Became Eligible For Social Security After We Divorced?

Hi Larry, I worked for the government most of my life. I was married for over 10 years and then divorced. After the divorce, I retired from the government and began to work in the private sector. I was able to earn the last of my 40 credits for a Social Security benefit at that time. I understand that any Social Security benefit to me will be offset by my pension. I am 62 and plan to wait to file for Social Security at 70. Will my ex be able to claim a divorced spousal benefit based on my work record even though I became eligible for Social Security long after we divorced? If so, at what age can he draw this benefit and will his benefit be reduced due to my pension? He does not receive any part of the pension. Thanks, Margaret

Hi Margaret, If you’re receiving a pension based on your work that was exempt from Social Security taxes, then your Social Security retirement benefit rate will likely be reduced due to the Windfall Elimination Provision (WEP). Your ex could still potentially qualify for divorced spousal benefits if he meets the requirements, but his divorced spousal rate would be calculated based on your reduced WEP benefit rate. Divorced spousal benefits can be payable as early as age 62, but are reduced for age if the person starts drawing prior to their full retirement age (FRA). Best, Larry


Do You Have Any Advice For Us?

Hi Larry, I turned 60 in March, My wife is an Irish citizen and lived and worked there until a few years ago. Living here since, she has never worked here. She’s also a US citizen now. We plan to retire when I turn 65 and her 62 then return to live in Ireland. I understand there’s an agreement between Ireland and US. Money will be very tight. Her Irish pension is very small. So I may work until 67. Do you have any advice on our plans? Thanks, Roy

Hi Roy, What I can tell you is that if your wife receives a pension from Ireland’s Social Security program, it won’t have any adverse effect on her US Social Security spousal benefits. But if either you or your wife start drawing your US Social Security benefits prior to your full retirement ages (FRA), your benefit rates will be reduced for age accordingly. You can still be paid your US Social Security benefits while living in Ireland, so that won’t be a problem.

Other than that, though, I simply don’t have enough information about your work history and potential Social Security benefit rate to be able to give you any advice. You may want to strongly consider using one 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


Does Social Security Make These Types Of Calls?

Hi Larry, I just received a robocall regarding my Social Security. The caller said that my Social Security benefits were suspended because of suspicious activity on my account and asked me to call back. Does Social Security admin make these types of phone calls? Thanks, Rachel

Hi Rachel, They do not. Social Security does call people on occasion for various reasons, but the call you received sounds like a scam. Just to be safe, though, you may want to call Social Security’s toll free number 1-800-772-1213. That way you can report the call that you received and also verify the status of your benefits. Best, Larry


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