Economic Security Planning, Inc.
Today’s column addresses questions about Social Security’s assumptions about continuing income when estimating future benefits, spousal benefits before retirement benefits, disability benefits, totalization and spousal benefit eligibility. 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.
What Continuing Income Does My Social Security Retirement Benefit Estimates Assume?
Hi Larry, I’m planning on working until 70. Does the benefit estimate from my Social Statement statement for when I turn 70 assume I only work until my full retirement age of 66 or till 70? Thanks, Arnold
Hi Arnold, If you review your Social Security statement, you’ll note that the benefit estimates listed are prefaced by a sentence stating: “At your current earnings rate, If you work until…”. What that means is that Social Security is using assumed future earnings in their calculation of your benefit rates equal to the amount that you earned in the most recent year for which Social Security has verified your earnings. And they’re assuming that level of earnings will continue for all future years up to the age of the estimate. So your age 70 estimate shown on the statement would include assumed future annual earnings at the most recently verified earnings level for each year up until you reach 70.
There is usually some lag time between the end of a year and when Social Security posts a person’s earnings for that year to their earnings history. So a Social Security statement issued in 2020 may be using either the person’s 2019 earnings or 2018 earnings as the assumed level of future year earnings. If a person had no earnings in either of those years, Social Security wouldn’t use any assumed future earnings in the calculation of their benefit estimates.
My company’s software — Maximize My Social Security or MaxiFi Planner — uses the same formula used by Social Security to calculate benefit rates. The software also permits you to project in future earnings at any level and for any years that you choose, so it can provide you with more accurate estimates than those shown on your Social Security statement. 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
Can My Husband File For His Benefits At Age 62 Then Switch To 50% Of My Benefit Later?
Hi Larry, I am 61 and my husband is 62. We will be divorcing this year. He is eligible for Social Security retirement benefits but my Social Security retirement benefit will be higher. Can he apply for his this year then wait two years to switch and collect a divorced spousal benefit, equal to 50% of my retirement benefit? Or is what I heard true, that it would be only 35% until I reach full retirement at 66? Or is he locked into his just his Social Security retirement benefit if he starts collecting it now? If he collects his divorced spousal benefit when I am 62, is he locked into that rate or can his rate increase when I reach full retirement at 66? Thanks, June
Hi June, No one is allowed to switch from drawing their own Social Security retirement benefits to drawing just spousal benefits instead. However, they can potentially file for a partial, or excess, spousal benefit if they later become eligible for a higher benefit rate based on their spouse’s Social Security record. That excess benefit would then be paid in addition to the person’s own retirement benefit rate.
If your husband files for his retirement benefits at 62, the resulting reduction in his benefit rate will continue for as long as both of you are living. He’ll also be deemed to be filing for spousal benefits when he files for his retirement benefits, so if your husband files for reduced benefits and you then file for your benefits before your husband reaches full retirement age (FRA), his spousal benefit rate would also be reduced for age. The reduction for age would be determined by your husband’s age at the time that he starts drawing each benefit. Your age has no bearing on the calculation of your husband’s spousal rate. Best, Larry
How Do I Apply For A Totalization Benefit?
Hi Larry, I have worked on and off in the US for 20 years I’m 54. It seems I will have eligibility for some benefits if I qualify on credits. My current statement says I have 36 credits and it seems to include 2 years of assumed work. I have not worked in the US since 2016 so maybe I have 28 credits now.
I have also worked in many other countries. I’ a Canadian and Swiss Citizen and have worked about five years in each and I expect to get pension from each. I have also worked 4-5 years in Japan and one year in Australia.
Based on totalization agreements, I was going to try to qualify for US benefits by requesting totalization with Japan. I am worried that the Windfall Elimination Provision (WEP) will reduce or eliminate my benefits in the US or Canada or Switzerland where I should be eligible for some benefits. I don’t know if I would be eligible for any benefits in Japan since I’m not a citizen there and din’t contribute that long.
How do I apply for totalization? And do I have to worry about benefits reduction in the US if my situation in Canada and Switzerland is reported? Up to now I assumed I would get nothing anywhere, but looking at my US situation I think I might get some small benefit. I have about $37,000 lifetime payments to Social Security. Thanks, Barry
Hi Barry, Totalization benefits are only paid when a person doesn’t have enough work credits to meet the normal eligibility requirements for benefits from a country’s Social Security program. If you have at least 40 quarters of US Social Security coverage, you’ll be able to qualify for US Social Security retirement benefits based on the regular rules. In other words, you’d then be eligible for regular Social Security retirement benefits, not a totalization benefit.
If you have at least 6 quarters of US Social Security coverage but fewer than 40 quarters, then Social Security may be able to give you additional credits based on your work in one or more of the countries with which they have a totalization agreement. Social Security would then base your totalization benefit rate on your US earnings using a modified calculation formula.
The Windfall Elimination Provision (WEP) could only affect your benefit rate if you have at least 40 quarters of coverage and thus qualify for US Social Security retirement benefits under the normal rules. And only if you receive a pension based on your work that was exempt from US Social Security taxes, which could include a Social Security benefit from a foreign country that’s based on your work in that country. The WEP does not affect totalization benefits. My knowledge only extends to US Social Security benefits though, so I can’t give you any information about benefit regulations in other countries.
You would need to be at least age 62 to qualify for US Social Security retirement benefits based on either the normal requirements or the totalization rules. You can apply for US Social Security or totalization benefits at a US Social Security office, a foreign Social Security office in a country with which we have a totalization agreement, or at the US embassy in your country of residence. Best, Larry
Can My Husband Apply For A Disability Supplement To His Current Social Security?
Hi Larry, My husband started receiving his Social Security retirement benefit at 62. He is now 64. He has had a lung removed a few months ago and is undergoing chemotherapy. Can he apply for a disability supplement to his current Social Security retirement benefit? Does he have any options at all to supplement his Social Security retirement benefit in any way? Also, could I apply for any supplement — I have not taken my Social Security retirement benefit yet and I am also 64. Thanks, Sarah
Hi Sarah, Yes, your husband can file for Social Security disability (SSDI) benefits, but that wouldn’t be a totally separate benefit from the Social Security retirement benefit he’s now drawing. If your husband is approved for SSDI prior to his full retirement age (FRA), Social Security would remove some of the reduction for age that was applied to his current benefit rate. The result would be a somewhat higher monthly benefit rate, not an entirely new benefit.
I can’t tell you whether or not your husband might qualify for any other types of benefits. Social Security does administer a Supplemental Security Income (SSI) program for low income people, but if your husband’s Social Security is more than around $800, his income would be too high to qualify for any SSI benefits.
As for your benefits, you could potentially file now for either Social Security retirement benefits or spousal benefits, but your benefit rate will be reduced for age if you start drawing prior to your full retirement age (FRA). You couldn’t file just for retirement benefits or just for spousal benefits, though. Whenr you file, you’ll be deemed to be filing for both of these benefits, and you’ll only be able to receive essentially the higher of the two benefit rates. Also, until you reach FRA if you work and earn too much then part or all of your benefits could be withheld due to Social Security’s earnings test. Best, Larry
Can My Wife Receive Spousal Benefits From My Record Before I Reach Age 62?
Hi Larry, My wife is 62 and I will be 62 in December. She wants to start drawing her Social Security retirement benefit now. I will wait until I am my full retirement age to draw mine. Can she also receive benefits as a spouse from my record before I reach 62? Thanks, Bill
Hi Bill, The soonest your wife could receive spousal benefits is when you start drawing your Social Security retirement benefit. And she’ll only qualify for spousal benefits if 50% of your primary insurance amount (PIA) is higher than her own PIA. A person’s PIA is equal to the amount of their Social Security retirement benefit if they start drawing at full retirement age (FRA). Best, Larry