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Ask Larry: Are There Disadvantages To Filing A Restricted Application For Spousal Benefits Only?

Today’s column addresses questions about potential downsides to filing a restricted application, how the earnings test is applied, applying for spousal benefits, the accuracy over time of SSA benefit estimate and potential effects of survivor benefits based on a spouse’s record. 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.

Are There Disadvantages To Filing A Restricted Application For Spousal Benefits Only?

Hi Larry, I am wondering if there is a disadvantage to my husband collecting a restricted spousal benefit and waiting to collect his at age 70 to file for his Social Security retirement benefits. I was the low earner and will switch to my spousal benefit when he files. If I was to die before he collects his retirement benefit at 70, could he switch from restricted spousal to receive a widower benefit on my record while waiting to collect his retirement benefit? Thanks, Wade

Hi Wade, The potential disadvantage is that you would have to start drawing your benefits in order for your husband to be able to qualify for spousal benefits. But if your Primary Insurance Amount (PIA), which is equal to your full retirement age (FRA) retirement benefit amount, is significantly less than 50% of your husband’s PIA, then that probably wouldn’t be much, if any, of a downside. However, if you start drawing your own benefits prior to full retirement age (FRA), you’ll continue to receive a reduced rate for as long as both you and your husband are living, even if you later become eligible for spousal benefits.

Once you start drawing your own Social Security retirement benefits, you can’t later switch to drawing just a spousal benefit. If you’re drawing on your own record and you later become eligible for spousal benefits, your unreduced spousal rate would be calculated by subtracting your PIA (inclusive of delayed retirement credits, if applicable) from 50% of your husband’s PIA. That could then be paid in addition to your own benefit rate, so if your own rate is reduced for age then you’ll end up getting less than half of your husband’s PIA. As noted above, a person’s PIA is equal to wha they’d receive at their full retirement age (FRA), without being reduced for filing earlier

If you die prior to reaching 70, your husband’s spousal benefit would convert to a widower’s benefit equal to the full amount that you were receiving from your record. So the sooner you start drawing prior to 70, the lower that rate would be. Again, though, that’s probably not a concern if your husband can switch to his own higher rate at age 70.

It sounds like you and your husband should strongly consider using one of my company’s programs — Maximize My Social Security or MaxiFi Planner —  to compare all of your various options so that you can determine the best possible way to maximize 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

If You Take Early Social Security Retirement Benefits And Continue Working, Does The Penalty Stop When You Reach Full Retirement Age?

Hi Larry, If you take early Social Security retirement benefits before my full retirement age, and if work and continue to work past then, will I stop getting hit by the penalty? Thanks, Phil

Hi Phil, If by “penalty” you mean having your benefits withheld because of your earnings, then yes that would stop effective with the month you reach full retirement age (FRA). There is no limit on the amount that you can earn and still draw Social Security benefits once you reach FRA.

However, if by “penalty” you mean the reduction in your benefit rate that would be assessed if you start drawing prior to FRA, that benefit reduction is permanent for any months that you are paid benefits prior to FRA. The reduction is removed effective at FRA, though, for any months that your benefit payments are withheld prior to FRA because of your earnings. Best, Larry

Can My Wife Apply For Spousal Benefits When I File For My Benefits?

Hi Larry, I was born in 1961 and am planning to retire at 65. My wife was born in 1965. Can she apply for Social Security spousal benefits at the same time I file? Thanks, Steve

Hi Steve, Unless your wife has a child in her care who qualifies for benefits from your Social Security record, the earliest that she could qualify for spousal benefits is when she’s 62. So she won’t be able to claim benefits at the same time that you do if you start drawing your benefits before then. Social Security does allow people to file their applications in advance, however, so your wife could potentially file an application for spousal benefits up to three or four months prior to the month she reaches 62. Best, Larry

Can I Assume That My SSA Estimate Will Be Accurate When I Apply At 62?

Hi Larry, I retired in 2018 at the age of 57 and I am only collecting a pension. I have a forty year work history that’s documented with the SSA. About my SSA estimate — can I assume the numbers will be accurate when I apply for early benefits at 62? I don’t plan on working ever again but I do have those 40 years paid into SSA. Thanks, Amanda

Hi Amanda, Probably not exactly. Social Security benefits are based on an average of your highest 35 years of wage-indexed earnings on which you paid Social Security taxes. Your earnings will be indexed based on the average wage index in the year you reach 60, and that figure won’t be known until shortly prior to the year you reach age 62. So estimates provided prior to when a person reaches age 62 are exactly that, an estimate.

Also, Social Security frequently uses assumed future earnings in their estimates. In other words, they assume that you will continue earning the same amount that you earned in the most recent year posted to your earnings record until you retire. So if Social Security used assumed future earnings in your estimate that don’t materialize because you’ve retired, then your estimate will likely be too high.

Last, you don’t mention whether or not you paid Social Security taxes on the earnings on which the pension you receive is based, but if the pension is based on your earnings that were exempt from Social Security taxes, your Social Security benefit rate could be reduced due to the Windfall Elimination Provision (WEP). Benefit estimates provided by Social Security do not account for any reductions resulting from WEP, so if you receive a non-covered pension then your estimate would almost certainly be too high. Best, Larry

Would My Social Security Benefit Be Reduced If I Receive A Survivor Pension From My Wife’s Pension Plan?

Hi Larry, My wife has a Connecticut teachers retirement pension. If we select a surviving spouse benefit and she passes away before me, would I be able to collect my Social Security retirement benefit and her surviving pension? Or would my Social Security retirement benefit be reduced? Thanks, Matt

Hi Matt, Your Social Security would not be reduced if you receive a survivor benefit from your wife’s teachers’ pension plan. Pension benefits that are based on earnings that were exempt from Social Security taxes can only affect a person’s Social Security benefits if the non-covered pension is based on the person’s own earnings, not the earnings of a spouse. Best, Larry

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