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Ask Larry: Will Stopping Work At 60 Lower My Social Security Benefits?

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 potential effects of not working before filing, whether early retirement benefit reduce later widow(er)’s benefits, whether delaying makes sense in all cases, restricted applications after a divorce and the timing of benefits checks. Larry Kotlikoff is the founder and president of Economic Security Planning, a company that markets Maximize My Social Security, a Social Security benefits calculator referred to in this post.

See more Ask Larry answers here.

Ask Larry about Social Security:

Will Stopping Work At 60 Lower My Social Security Benefits?​​

Hi, My husband has been challenged with serious health problems and had begun his Social Security retirement benefits at 62, 4 years ago. I’d like to retire now, at 60. If I don’t pay Social Security taxes over the next 2 years, I’ve heard my benefit amount may be affected but I don’t know what to believe. Will my benefit be reduced if I don’t work and pay Social Security taxes over the next two years Thanks, Norma

Hi Norma, I’m sorry to hear about your husband health problems. The answer to your question depends on whether or not the estimated amounts that you received from Social Security’s calculator included projected future earnings. If they do and those earnings don’t occur because you retire early, then the estimates may be too high. Otherwise, if the estimates are based only on your actual earnings to date then they should be fairly accurate.

Exact retirement benefit rates can’t be calculated until shortly prior to the year in which a person turns age 62. This is due to the indexing of earnings that Social Security uses in their benefit calculations. Therefore, any retirement benefit estimate that you receive at age 60 is just that, an estimate. One way to obtain the most accurate possible retirement benefit estimates is by using an expert Social Security benefits calculator, such as my company’s software or other very reliable and comprehensive software. Best, Larry

If I File For My Benefits At Age 62 Will It Reduce My Potential Widow’s Rate?​​

Hi Larry, my husband is 67 and I am 58. We are both retired and he claimed his Social Security retirement benefit at 66. His salary and working years were much higher than mine. If I take my reduced early retirement benefit on my work record at 62, will it reduce my potential widow’s benefit later? Thanks, Jean

Hi Jean, Regardless of when you start drawing your own Social Security retirement benefits, your combined benefit rate as a widow would increase to your husband’s full rate provided that you are at least full retirement age when you start drawing widow’s benefits.

For example, say Bob files for his full retirement age benefit of $2,000 at 66. Bob’s wife Cecilia files later for her retirement benefits at age 62 and receives a reduced rate of $800. If Bob dies after Cecilia reaches her full retirement age, Cecilia would continue to be paid her own $800 retirement benefit plus $1,200 as a widow for a combined rate of $2,000. Best, Larry

Is Waiting Until Age 70 The Best Way To Maximize Our Benefits?​​

Hi Larry, My wife is currently collecting a Social Security disability benefit and was born in 1953. She will reach full retirement age (FRA) later this year. I was born in 958. Would the best way to maximize our benefits be for me to wait until 70? Do I need to file and suspend at my FRA? When I turn 70 and start collecting my retirement benefits, can my wife then apply for spousal benefits? Thanks, Trevor

Hi Trevor, Your best filing strategy largely depends on your and your wife’s comparative benefit rates. You can use an expert Social Security benefits calculator as described in other answers to compare your options and determine the best overall strategy for you and your wife.

There would likely be no reason for you to file for and suspend your retirement benefits at your FRA, since even if your wife qualifies for spousal benefits they couldn’t be paid to her while your benefits are in suspense. And, you could earn delayed retirement credits in the same manner whether you file for and suspend your benefits or simply wait until later to apply for benefits.

Your wife may be able to receive spousal benefits when you start drawing your benefits, but only if 50% of your Primary Insurance Amount (PIA), which is equal to your full retirement age (FRA) retirement benefit amount, is higher than your wife’s own PIA. And if it is, she wouldn’t receive only spousal benefits and stop being paid her own benefits. Instead, she would continue to be paid her own benefit rate plus a partial spousal benefit equal to 50% of your PIA minus her own PIA. Best, Larry

Can I File A Restricted Application For Divorced Spousal Benefits Only?​​

Hi Larry, I will turn 66 in August and plan to file a restricted application for divorced spousal benefits in order to exclude retirement benefits on my own record from the scope of the application and maximize my retirement benefit when I finally do file for it at 70. My ex husband also will have turned 66 a few months before me. We were married for more than 10 years. Can I file for restricted benefits prior to my August birth month and request benefit start of August 2019 or should I wait to file until August? Is it necessary for me to wait until after my actual August birthday? Do you recommend filing online, over the phone or in person? Thanks, Claire

Hi Claire, Yes, it sounds like you meet all of the requirements to be able to file a restricted application for divorced spousal benefits only effective with the month you reach your full retirement age of 66. You can file your application up to 4 months before then but just be sure to choose the month that you will reach age 66 as your month of election to begin benefit entitlement. In my opinion, it doesn’t really matter whether you file online, by phone or in person. Whichever option you are most comfortable with should be fine. Best, Larry

Why The Two Month Wait?

Hi Larry, My application was done and submitted earlier this month and my birthday is in July, when I turn 62. My confirmation letter says my first payment won’t be until September. Why the two month wait? Thanks, Steve

Hi Steve, You must be at least age 62 for a full month in order to be eligible for Social Security retirement benefits. So in your case, this August is the first month that you could claim benefits. And, Social Security benefits are paid in the month following the month for which payment is due, hence your first payment is scheduled for September. In most cases Social Security benefits are paid on either the second, third or fourth Wednesday of a month depending on your birthdate. Since you were born in the middle 10 days of the month, your regular payment date will be on the third Wednesday of each month. Best, Larry

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

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