Economic Security Planning, Inc.
Today’s column addresses questions about whether to decide when to file according to a break even analysis, whether you must actively file for benefits taken after earlier benefits and how military credits are applied for periods of actively service. 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.
Should I Decide When To File For Social Security Benefits Based On Break Even Analysis?
Hi Larry, I’m looking at when to take my Social Security retirement benefit. I’m 61, retired, and had been planning to wait until my FRA of 66 years and 10 months to file. But my older wife, also not working and who does not have enough credits for her own benefits, is already at her FRA of 66 years and could collect spousal benefits as soon as I file.
Unlike myself, there is no incentive for her to wait as her spousal benefit won’t increase. If I file at 62, I will receive a reduced amount, but she will collect 50% of my FRA amount rather than my age 62 amount, right?
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It is tempting to file early as her spousal benefits would more than make up for my reduced amount, at least for many years. My calculations show that the break even age for waiting until my FRA would be at age 88 years for me at which time my wife would be age 93.
We have enough savings to wait until my FRA, but I wonder if it would be a good bet to have extra money while we’re younger and in good health. What are your thoughts? Thanks, Adam
Hi Adam, Break even analysis shouldn’t be a determinative factor when making decisions about when to file for benefits. It’s something to potentially consider, but it’s not the most important factor.
That said, it sounds like you have a good understanding of your options. Filing for your benefits early would allow your wife to start drawing spousal benefits sooner, and her spousal rate would not be reduced for age if she’s already at least full retirement age (FRA).
The downside of filing early is that you’d then be stuck with a reduced benefit rate for as long as you live. And if you die prior to your wife, she would then receive a lower widow’s benefit rate due to the fact that you started drawing your benefits early.
You don’t mention whether or not you may have more income at some point, so I don’t know if the Social Security earnings test would factor into your decision making. You may want to use my company’s software — Maximize My Social Security or MaxiFi Planner — to fully analyze the options available to you so you and your wife can make informed decisions and choose the strategy for maximizing your benefits in the way that works best for you. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry
Will Social Security Automatically Switch Me From Spousal Benefits To My Own Benefits At 70?
Hi Larry, I have been getting spousal Social Security spousal benefits based on mt wife’s record. She’s the lower earner and filed at her FRA and I could claim my spousal benefit and hold off drawing my own retirement benefit because I was born before 1954. I turn 70 in April and will want to switch to my larger retirement benefit which will also of course allow my wife to switch to her larger spousal benefit.
Do I need to notify Social Security about these changes in benefits received or will they automatically switch me to my own retirement benefits and my wife to her spousal benefits? Thanks, Ben
Hi Ben, Social Security can’t switch you to drawing your own benefits unless and until you apply for those benefits. Assuming that you have enough work credits to qualify for benefits based on your own work record, the only way that you could be collecting only spousal benefits is if you specifically excluded your own Social Security retirement benefits from the scope of your application when you applied for spousal benefits.
Otherwise, you would have been considered to be applying for both retirement and spousal benefits, and you would then have been paid only the higher of the two benefit rates. So since you haven’t yet applied for your own retirement benefits, Social Security can’t pay you those benefits unless and until you file an application for them.
Your wife of course can’t receive her spousal benefit until you file for your retirement benefit and she’ll also need to actively file for her spousal benefit once you file for your retirement benefit. Social Security won’t automatically convert you or her to either benefit. Best, Larry
How Do I Make Sure That My Ex Husband’s Record Reflects The Credits He Was Entitled To?
Hi Larry, I helped my ex husband file for Social Security disability benefits around 2014 for his illness and he was approved to receive those benefits. I was unaware at the time that he was eligible for credits because he had served in the military in the 1990s.
My ex has passed in 2016 from his illness and I am single mother raising his son who is 15. How do I go about making sure that his record reflects the credit if he was entitled to receive this on his Social Security record. Thank, Diana
Hi Diana, Military wages have been subject to Social Security taxes since 1957, so those earnings are posted to a veteran’s Social Security earnings history just like wages from any other employer. Social Security also credits deemed military wages (DMW), which are extra wage credits that are added to the veteran’s actual military wages for periods of active duty during the years 1957 through 2001.
Starting with 1968, DMWs were automatically added to the actual military wages for active duty veterans and no further action is needed to receive the proper credits. So if your ex served in the military during the 1990s, all of the military credits he’s entitled to should already be posted to his Social Security earnings history. And all of those credits would have been included when calculating his Social Security disability (SSDI) benefit rate, as well as the benefit rate payable to eligible survivors.
You can check with Social Security to see if their records show that DMWs were included when calculating your son’s benefit rate, but I really don’t think it’s necessary.
By the way, you don’t mention whether or not you are receiving benefits in addition to your son, but since your son is under age 16 it sounds like you could probably qualify for divorced mother’s benefits if you aren’t remarried. However, your benefits could be subject to full or partial withholding if you’re working and earning too much. Best, Larry