Ask Larry: Should I File For Social Security Spousal Benefits?

Taxes

Social Security may be one of your largest assets. What and when you collect will make a huge difference to your lifetime benefits.

Today’s column addresses when to file for spousal benefits, when spousal benefits become available, whether survivor benefits can be voluntarily stopped, maximizing benefits for a married couple and when the Social Security Administration may recover errant payments. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc, a company that markets Maximize My Social Security and MaxiFi Planner.

See more Ask Larry answers here.

Ask Larry about Social Security here.

Should I File For Social Security Spousal Benefits?​​

Hi Larry, I am 64 and still working as a high earner. I do not intend to draw my Social Security retirement benefit until 70. My husband is past 70. Should I file for spousal benefits and if so is there any disadvantage. Thanks, Claire

Hi Claire, It doesn’t sound like you should. Since you were born after 1/1/1954, you’d be deemed to also be filing for your own Social Security retirement benefits if you filed for Social Security spousal benefits. You would then receive essentially just the higher of the two benefit rates, and your rate would be reduced for age if you filed prior to your full retirement age (FRA). Furthermore, there is an earnings test that could cause some or all of your benefits to be withheld if you file prior to FRA. Best, Larry


When Should My Wife File Her Application?​​

Hi Larry, I just applied for my Social Security retirement benefits to start in September. I’ll be 66 in October. My wife is 66 1/2 and will file a restricted application and ask for only her spousal benefit. What should the exact timing be for her to apply for benefits. Even though I’m not yet receiving a benefit, can she apply now? Or should she wait until I’m “on the books” and receiving a benefit? Thanks, Jesse

Hi Jesse, Your wife can file her application now while your application is still pending, or she can wait until your claim is processed. It really wouldn’t make any difference as long as she doesn’t wait too long. Your wife will want to be sure to claim benefits effective the same month you did, and she can do that anytime up to six months after your initial month of entitlement.

If you and your wife haven’t already done so, you may want to use one of my company’s two tools — Maximize My Social Security or MaxiFi Planner — to help maximize your lifetime Social Security benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

Can I Stop My Widow’s Payments?​​

Hi Larry, I claimed my widow’s benefit when I was 60 and receive about $1,000. It is not enough to live on and I would like to return to my career now that the economy is better and I can earn close to $90,000. Can I stop my widow’s payments somehow and earn my own money? From what I see, it looks like I will be penalized (ie: taxed) so heavily that it wouldn’t be worth it or fair compensation for the level of work I can do. Any suggestions? I am now 62. Thanks, Sally

Hi Sally, If you’ll be returning to a high paying job, all that you’d need to do to suspend your benefits would be to let Social Security know when you’ll start work and how much you’ll be earning. The Social Security earnings test would require $1 of your benefits to be withheld for each $2 that you earn in excess of $17,640 in 2019, so if you earn anywhere close to $90,000, you wouldn’t be eligible for any benefits this year. Since you’re not yet at your full retirement age (FRA), you can’t voluntarily suspend your benefits, though, and you almost certainly wouldn’t want to unless it’s required due to your earnings.

If you do return to work and some or all of your widow’s benefits must be withheld due to the earnings test (https://www.ssa.gov/planners/retire/whileworking.html), your widow’s rate will be recalculated after you reach your FRA in order to remove the age reduction for any months that you aren’t paid benefits. And, when you reach FRA you can draw all of your benefits no matter how much you earn.

If your own Social Security retirement benefit rate will be higher than your widow’s rate, your best strategy would likely be to wait until age 70 to switch to your own record. Your retirement benefit rate will continue to grow until you reach age 70, and any additional Social Security covered earnings you have in the future could further increase your retirement benefit rate. Best Larry


When Should We Sign Up For Benefits To Maximize Our Social Security?

Hi Larry, If I turn 70 in October and my wife turns 70 in January, when should we sign up for Social Security benefits to maximize our Social Security and also not have Social Security office staff do a 6 months retroactive filing on our monthly benefits. Thanks, Lee

Hi Lee, If you want your benefits to start effective with the month you reach age 70, you would choose October as your month of election to start benefits unless you were born on October 1st, in which case you’d want to choose September. In your wife’s case, she’d want to choose January as her month of election assuming that she too want’s to start drawing effective with age 70. Social Security won’t start your benefits any earlier than the month you choose as your month of election to begin drawing benefits. You can file your applications up to 4 months prior to the month you want to start drawing benefits.

If both you and your wife choose to start drawing your Social Security retirement benefits effective with the month you each reach age 70, your wife could file a restricted claim for spousal benefits only starting with the month you start drawing your benefits. That would permit her to receive a spousal benefit equal to 50% of your full retirement age rate for a few months prior to filing for her own benefits at 70. Doing so would not have any adverse effect on your wife’s own retirement benefit rate at age 70. However, that may not be your optimal strategy depending on your and your wife’s relative benefit rates. You and your wife should strongly consider using software to compare all of your various options so that you can choose the best possible strategy for claiming your benefits. Best, Larry


How Long Does It Take For Social Security To Recover An Incorrect Direct Deposit?​​

Hi Larry, My mother passed away in February. The Social Security Administration was notified by the funeral home of her death but not in time to prevent the latest deposit. How long does it take for Social Security to take back and collect this deposit? Thanks, Mark

Hi Mark, I’m sorry for your loss. It’s actually the Department of the Treasury that issues Social Security payments, and they generally take action to recover erroneous direct deposits immediately upon being notified of a death. The Treasury Department can be notified of a death either by banks or by Social Security.

If your mother’s Social Security payment still hasn’t been recalled by the Treasury, then they may not yet be aware of her date of death. Notifications of death sent to Social Security from funeral homes are sometimes delayed or not processed timely. You may want to try contacting Social Security and/or your mother’s bank to make sure that they’ve notified the Treasury Department of your mother’s date of death. Best, Larry

To learn more about your Social Security options, visit Economic Security Planning, Inc.

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