Taxes

Ask Larry: Should My Wife Take Early Retirement Now And Higher Spousal Benefits Later?

Today’s Social Security column addresses questions about how early retirement benefits can affect later spousal benefits, collecting while earning income and taking survivor’s benefits after spousal benefits. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc.

See more Ask Larry answers here.

Have Social Security questions of your own you’d like answered? Ask Larry about Social Security here.


Should My Wife Take Early Retirement Now And Higher Spousal Benefits Later?

Hi Larry, I’m 65 and my wife is 62. I am the primary breadwinner and intend to wait till 70 to start collecting my Social Security retirement benefits. Should my wife start collecting her retirement benefits now, given that later she can increase it to her spousal amount? Thanks, Scott

Hi Scott, Your wife can start drawing her own benefits as early as 62 but if she does, her benefit rate will be reduced for age. And that reduction will continue for as long as she’s getting retirement or spousal benefits.

Here’s an example to clarify: Let’s say Joy files for her Social Security retirement benefits this year at age 62. Joy’s benefit rate is reduced for age because she’s claiming her benefits at 62. Several years later, Joy’s spouse applies for their benefits. Joy’s unreduced excess spousal benefit would then be calculated by subtracting her PIA from 50% of her spouse’s PIA. If Joy is at least FRA when she becomes eligible for her excess spousal benefit, she would then be paid the full unreduced excess spousal amount in addition to her own reduced rate.

Whether or not your wife should start drawing benefits early depends on a number of different factors. You and your wife may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to ensure your household receives the highest lifetime benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry.


Is It False That You Can Collect Your Benefits Even If You Are Still Working?

Hi Larry, I am 63 and requested my retirement. I was approved. Then there was a statement: “Your payments are suspended because our records indicate that you were or are currently working.”

I was under the impression you could receive your benefits even if you are still working. Is this a false statement? Thanks, Tim

Hi Tim, That depends on how much you’re earning and how old you are. Since you are under FRA, Social Security would need to withhold $1 of your benefits for each $2 that you earn in excess of $19,560. However, once you reach full retirement age (FRA), you’ll be able to be able to earn an unlimited amount and still be able to collect Social Security benefits with no reduction. Best, Larry


Will I Have To Pay Back The Spousal Benefits Social Security Gave Me With My Benefit?

Hi Larry, I am in the process of petitioning Social Security to permit me to file for widows benefits at my FRA. I was born n in 1957. My husband passed away last year and he waited until he was 70 to file. I filed at 62 and I received my amount plus a small spousal benefit that they gave me.

Will I have to pay back the spousal benefit they gave me with my benefit if I wait until my FRA to file for my widows benefit? Thanks, Luz

Hi Luz, I’m sorry for your loss. You won’t have to repay any spousal benefits that you were paid for months prior to the month of your husband’s death, but if you receive spousal benefits for the month of your husband’s death or for any month after that then those benefits will need to be returned.

Spousal benefits can only be paid for months prior to the month of the worker’s death, so you should only be paid your own benefits until you claim widow’s benefits. Best, Larry


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