Economic Security Planning, Inc.
Today’s column addresses questions about whether dependent benefits are affected by the earnings test, how delayed retirement credits for retroactive benefits are calculated and how repayments of overpayments are calculated. 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.
Can My Dependents Get Social Security Benefits Even If I Can’t Be Paid Due To Earnings?
Hi Larry, I am 65 and I still work. I also know at my full retirement age, my working income no longer matters for my benefit. I realize if I claim now, I would receive nothing because of my income. But I do have four dependents under 18. If I file now, knowing I’d receive none of my benefits because of my income, would my dependents be able to start receiving their benefits? Thanks, Scott
Hi Scott, Your dependents cannot be paid for any months that you can’t be paid as a result of your earnings. However, that doesn’t necessarily mean that you and your children couldn’t potentially get benefits for part of the year. If you won’t reach age 66 prior to 1/2/2021, Social Security would need to withhold $1 of the benefits payable on your record for each $2 that you earn in excess of $18,240 this year. Whether or not that would still permit the payment of at least some benefits depends on your benefit rate and the exact amount of your earnings.
For example, say Amy files for benefits when she turns 65 in 4/2020. Amy’s reduced monthly benefit rate is $2,000, and the family maximum benefit (FMB) limit on Amy’s record allows each of her four children to qualify for a monthly benefit of $400. Therefore, total monthly benefits potentially payable on Amy’s record total $3,600. However, Amy is still working and will earn $68,640, or $50,400 more than the Social Security earnings test exempt amount of $18,240. That requires Social Security to withhold $25,200 of the benefits payable on Amy’s record (i.e. $1 for each $2 of the excess earnings) before any payments can be paid. To do that, Social Security would withhold all of Amy and her children’s total monthly benefit of $3,600 for 7 months (i.e. $25,200 / 3600 = 7). That means neither Amy or her children would be paid anything for the months April through October 2020, but they could then be paid their full monthly benefits for November and December 2020.
Your best filing strategy depends on a number of different variables, so you may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to explore what filing options are open to you and which of these will yield the highest lifetime household benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry
If I File This Year Would My Back Pay Be Paid At My Age 69 Rate Or My Age 68 Rate?
Hi Larry, I am 68 and not drawing Social Security retirement benefits yet. I still work full time and am thinking of retiring this year. I will be 69 in January 2021. If I retire in August, how many months back will they pay if I request retroactive filing? Also, if I wait until 69 to retire, would these retroactive payments be at my age 69 benefit rate or age 68 rate? Thanks, Roy
Hi Roy, The maximum retroactivity allowed on an application for Social Security retirement benefits is six months. So if you applied for benefits 8/2020, you could claim benefits starting as early as 2/2020.
If a person claims Social Security retirement benefits any time between full retirement age (FRA) and 70, their initial benefit rate would include only the delayed retirement credits (DRCs) they accrued through December of the year prior to the year they first claim benefits. Any additional DRCs accrued in the first year of benefit entitlement would be credited effective their benefit payment for the following January.
Therefore, if you claim benefits any month in 2020 and your turned 68 in 1/2020, your initial benefit rate would be based on your age 68 rate. In your case that would mean you’d be credited with 24 months of DRCs at a rate of 2/3rds of 1%, or a total increase of 16%. Any additional DRCs earned in 2020 would be creditable effective with your payment for 1/2021. If you claim benefits in 2/2020, you’d only be credited with one DRC for 2020, which would mean that your total DRC increase starting with your benefits for 1/2021 would amount to roughly 16.67%. Best, Larry
Why Is Social Security Making Me Pay So Much Back Each Month?
Hi Larry, I turned 66 in February 2020. I am drawing my Social Security spousal benefit. In 1994, I was drawing Social Security disability from back surgery and injury. I later was able to work some part time. I went to get work release each time. I went back to work full time six years ago. When I went in to the SSA office in February to start drawing, they said they over paid me in disability benefits by $21,000 so I had to pay back over half of my monthly check. I will only get $300 each month for three years until it is repaid instead of $,1028 a month. Why are they making me pay this much back each month leaving me with such a small amount? Thanks, Kim
Hi Kim, If you receive Social Security benefits you’re not entitled to, it’s referred to as an overpayment of benefits. If overpayments aren’t repaid, Social Security can collect the overpayment by withholding any future Social Security benefits to which the overpaid person becomes entitled.
Normally, Social Security would withhold the overpaid person’s entire benefit payment until the overpayment is recovered, but they are allowed to accept a lower withholding rate as long as the amount withheld results in full recovery of the overpayment within three years. The only way they’d withhold less is if you can show that you’d be unable to pay for your necessary living expenses unless a lower amount is withheld monthly. If you think you’d qualify for a lower withholding rate, you’ll need to contact Social Security a submit proof of your income and expenses. Best, Larry