Economic Security Planning, Inc.
Today’s column addresses questions about how SSA determines spousal benefit amounts, COLAs and survivor benefits, when COLAs and delayed retirement credits are applied, the WEP and multiple pensions and the effect of the family maximum on child benefits. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc, which markets Maximize My Social Security and MaxiFi Planner.
See more Ask Larry answers here.
Have Social Security questions of your own you’d like answered? Ask Larry about Social Security here.
How Will Social Security Calculate My Wife’s Spousal Benefit?
Hi Larry, Both my wife and I are 64. My wife is considering claiming her retirement benefits now and her monthly benefit would approximate $840 per month. I am waiting to FRA when I’ll receive $3090 per month to file for my retirement benefits. When I file for my retirement benefit and my wife then files for her spousal benefit, will her monthly benefit increase to 50% of my retirement benefit or is she locked in at her retirement benefit amount of $840? Thanks, Stan
Hi Stan, from what you write, it sounds like your wife would be eligible for what’s termed an excess spousal benefit in addition to what would be her reduced retirement amount based on her own earnings record. Note that her total spousal benefit would never be more than 50% of your Primary Insurance Amount (PIA), which is equal to your full retirement age (FRA) retirement benefit amount and if you file as described above, it will be less than 50% of your PIA.
The excess spousal benefit equals 50% of your PIA minus 100% of her PIA. If she files for her retirement benefit before her FRA, it will be permanently reduced. So her excess spousal benefit, added to her reduced retirement benefit amount will be somewhat less than 50% of your PIA. If your wife does not file for her retirement benefit before her FRA, her total unreduced spousal benefit will equal 50% of your PIA. You may want to use my company’s software — Maximize My Social Security or MaxiFi Planner — to see exactly what the effect of filing early would be. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry
Do I Qualify For COLAs If I Receive Benefits On My Deceased Husband’s Record?
Hi Larry, I’m receiving a widow’s benefit based on my late husband’s work. Should I expect to see an increase due to cost of living allowances? Thanks, Sally
Hi Sally, I’m sorry for your loss. Yes. Social Security cost of living increases (COLAs) apply to all types of benefits issued by the Social Security Administration, including widow’s benefits. Best, Larry
Would My Check For December 2020 Include Both DRCs And The COLA?
]Hi Larry, I’m confused about when delayed retirement credits and cost of living adjustments are credited. Based largely on information in your book, Get What’s Yours, I had decided to wait until 70 to apply for my retirement benefit. That will be in May, 2021.
Recently I’ve been considering applying a little early, in December of 2020. As I understand it my December benefit would be paid in January, 2021. Would that January check include both the accrued delayed retirement credits and cost of living adjustment through 2020? Thanks, Matt
Hi Matt, Since you won’t turn 70 until May 2021, if you choose to start your benefits in 12/2020, your payment for that month paid in 1/2021 would not include credit for any delayed retirement credits (DRCs) you accrued in 2020. Any months of DRCs you earn in 2020 would be creditable starting with your payment for 1/2021, which would be issued in 2/2021. However, my understanding is that the automated process used by Social Security to credit DRCs that become effective after a person’s initial month of entitlement is only done every other year, so the resulting increase might not be reflected in your actual benefit payments until sometime in 2022. Social Security would pay any back pay due retroactive to your payment for the month of 1/2021, however.
Social Security cost of living increases (COLA) take effect with the payments for December that are paid in January, though, so if there is a 2021 Social Security COLA and you choose to start your benefits effective December 2020 then your payment received in 1/2021 would include that COLA. Best, Larry
How Will SSA Calculate The WEP Guarantee If You Become Eligible For A New Non-Covered Pension?
Hi Larry, My understanding is that the Windfall Elimination Provision (WEP) guarantee is based on 50% of the amount of your non-covered pension in your first month of concurrent entitlement to the non-covered pension and Social Security benefits. How will SSA calculate a new pension amount, to subtract 50% of the amount of non-covered pension or introduce some adjustments to this amount like COLA or others. Thanks, Luis
Hi Luis, As you state, the Windfall Elimination Provision (WEP) guarantee amount is calculated based on 50% of the amount of your non-covered pension in the first month that you’re entitled to both the non-covered pension and Social Security benefits. If you’re already receiving Social Security benefits when you first become entitled to a non-covered pension, then the WEP guarantee would be based on the amount of your non-covered pension in the first month of your entitlement to the non-covered pension.
If you’re already receiving a WEP reduced Social Security benefit and you subsequently become entitled to a second non-covered pension, then the WEP guarantee would be based on 50% of the total amount of both non-covered pensions. If the resulting reduction in your Social Security benefit rate would then result in a lower Social Security benefit rate than what you’d receive using the normal WEP benefit computation formula, then the WEP guarantee would no longer apply.
If you’re receiving a Social Security benefit that’s reduced due to WEP, any subsequent cost of living adjustments (COLA) are applied to the reduced benefit rate. Best, Larry
When One Of My Children’s Benefits End Will The Other Child’s Benefit Increase?
Hi Larry, I receive SSDI and I have 2 children that receive benefits based on my record. Can you tell me when one of my children’s benefits end at 18, will the other child’s benefits increase? Thanks, Helen
Hi Helen, In your case, yes. Child’s benefits payable on the record of a living parent are normally payable at a rate of 50% of the parent’s primary insurance amount (PIA). A person’s PIA is equal to their full Social Security disability (SSDI) benefit rate, or their Social Security retirement benefit rate if they start drawing at full retirement age (FRA). However, there is a family maximum benefit (FMB) that can be paid on any person’s Social Security record, and that can cause the benefit amount payable to eligible family members to be reduced.
The maximum FMB that can be payable on the record of a worker receiving SSDI is 150% of their PIA. So for example, if a worker’s full SSDI rate (PIA) is $1,600, the FMB on their record would be limited to $2,400. That leaves $800 to potentially be paid to eligible family members. Since child’s benefits are calculated based on 50% of the living parent’s PIA, if only a single child was eligible for benefits in this example the child would get their full benefit amount of $800. However, if two children were eligible they’d have to split the $800 available from the FMB and receive $400 each.
So when your oldest child is no longer eligible for benefits, your youngest child’s benefit rate will likely double, leaving the same total amount of benefits payable. Best, Larry