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Today’s column addresses questions about the rate of reduction for filing less than 12 months before full retirement age (FRA), eligibility for benefits based on an ex’s record and how and when delayed retirement credits (DRCs) are applied when filing after FRA. 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.
If I Reach FRA In December 2022, What Will My Benefits Be In January 2022?
Hi Larry, I reach my FRA in December, 2022. Can I begin Social Security benefits in January, 2022 since it is the year of my FRA? I will be reducing my work hours and plan to use my Social Security benefit to make up some of the shortfall. I will make over the yearly limit. If I make $27,000 over the limit during that year, what will my benefit be reduced by? Do you receive reduced benefits monthly or do they not send a check until the appropriate amount is paid off? Thanks, Carl
Hi Carl, If you’ll reach full retirement age (FRA) in December 2022 and if you begin your benefits in January of that year, payment of your benefits for months prior to December could be subject to full or partial withholding depending on how much you earn. The Social Security earnings test exempt amounts for 2022 won’t be known until later this year, but the exempt amount of earnings for people reaching FRA in 2021 is $50,520. People earning more than that amount in the months prior to the month they reach FRA have $1 of their benefits withheld for each $3 they earn in excess of $50,520.
If you do earn more than the exempt amount, Social Security would withhold your entire monthly benefit payment for as many months as it takes to withhold the necessary amount.
Furthermore, if you start collecting Social Security retirement benefits 11 months prior to the month you reach FRA, your monthly benefit rate will be roughly 6.1% lower than the rate you’d be paid if you started drawing at FRA instead. Before deciding when to apply for your benefits, you may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to fully analyze your options so that you can determine your best strategy for maximizing your benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry
Am I Entitled To Receive Any Of My First Husband’s Social Security Benefits?
HI Larry, I was married over 30 years before divorcing. I later remarried but my second husband died after three years of marriage. My first husband also remarried but his marriage ended in divorce after two years. My first husband is yet living as is his second wife. We are all in our 80s.
Am I entitled to collect any of my first husband’s Social Security benefits? I was not awarded anything in the divorce. Thanks, Susanne
Hi Susanne, You can’t claim any part of an ex-spouse’s actual benefit payment, but you can potentially qualify for auxiliary or survivor benefits on the account of an ex-spouse.
However, a person who’s entitled to more than one type of Social Security benefit can only be paid up to the higher of those benefit rates. In other words, you basically can’t collect more than one benefit at a time. So the only way that you could be paid divorced spousal benefits is if your divorced spousal rate would be higher than the amount that you currently receive.
People who are potentially eligible for divorced spousal benefits on a living ex-spouse’s account can be paid up to 50% of the amount of their ex-spouse’s primary insurance amount (PIA), which is equal to their full retirement age (FRA) retirement benefit amount. Social Security should be able to tell you whether or not 50% of your ex’s PIA would be more than the amount of the benefit that you currently receive.
If your ex-husband’s PIA isn’t high enough for you to qualify for any divorced spousal benefits, you might still be able to qualify for benefits on his record if he dies before you. Surviving divorced spouses can be paid up to their ex’s full benefit rate, assuming that the ex’s benefit amount is higher than the amount of any benefits that the surviving ex-spouse currently receives. Best, Larry
When Would My Benefit Rate Increase?
Hi Larry, I just turned 68 and am trying to decide if I should take my Social Security retirement benefits now at $2,100 or wait two years and get $2,400. When or what month does the monthly benefit go up to the next level amount ? I don’t want to sign up for $2100 and find out that if I waited just a little longer, I could have received $2250. Thanks, Ryan
Hi Ryan, If you start drawing Social Security retirement benefits at your full retirement age (FRA), your benefit rate is equal to 100% of your primary insurance amount (PIA). For each month that you wait past FRA to start drawing your benefits up to 70, your rate goes up by 2/3rds of 1% (i.e. 8% per year).
But if you start drawing benefits between FRA and 70, Social Security initially only gives you credit for any delayed retirement credits (DRC) that you earned through December of the year prior to the year you start collecting. Any DRCs earned in the year that you start drawing are subsequently credited to your payment for January of the year after the year you claimed benefits.
For example, if Tom files for benefits in April 2021 when he reaches age 68, he would initially be credited with the 21 DRCs he earned through December 2020. That would result in the same rate he’d have gotten if he’d filed in January 2021.
However, effective with Tom’s benefit rate for January 2022, he’d be credited with the additional three DRCs he earned for not drawing benefits for January through March 2021. So from then on Tom’s monthly rate would be roughly 2% higher than it would be if he had started in January 2021. Best, Larry