Economic Security Planning, Inc.
Today’s column addresses questions about maximum rates for retirement benefits, the WEP and substantial covered earnings after 62, restricted applications and the 1/2/1954 deadline, when spousal benefits can be available and how they’re calculated and protective filing dates. 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.
Is There A Maximum Social Security Retirement Benefit Rate?
Hi Larry, When I started to receive Social Security Retirement benefits in 1/2019, I received my full retirement age benefit amount plus a 4% increase for delaying six months. I’m continuing to work with a salary above the FICA yearly maximum tax; however, my benefit is no longer what I’ve heard is the maximum. Is there really a maximum rate for retirement benefits? If so, how is it calculated and can I expect an adjustment later this year? Thanks, Patrick
Hi Patrick, The maximum possible full retirement age benefit, or primary insurance amount (PIA), is different for every year of birth. And a person can continue increasing their PIA if they continue working and earn more in a year than they did in one of the years previously used to calculate their PIA. So there is no real “maximum benefit rate,” despite what someone may have told you.
Social Security retirement benefits are calculated based on an average of a person’s highest 35 years of wage-indexed earnings, and the indexing factors used are different for each year of birth. Since you apparently had a high rate of earnings in the year 2019, those earnings can be used to recalculate your benefit rate effective with your payment for the month of 1/2020. Specifically, Social Security will substitute your 2019 earnings for the lowest of the 35 earnings years previously used to calculate your benefit rate. They will then calculate your new 35 year earnings average and use the updated average to determine your new benefit rate.
Social Security processes the benefit recalculations described above on an automated basis in around August or September of each year, so that’s when you’ll probably be notified of an adjustment in your benefit rate resulting from your 2019 earnings. Social Security would also then pay you any back pay that you have coming for the months from 1/2020 until the adjustment occurs. Best, Larry
Can I Get Credit For Additional Years Of Substantial Earnings After I’m Age 62?
Hi Larry, I’ll be subject to the WEP and am wondering if I can contribute past age of 62 while not yet receiving benefits to have a few more years of substantial covered income counted to reduce the WEP’s effect. Also, I would qualify at 62 if all years were averaged until that point. There’s a bill that could do this — do you think it will pass? Thanks, Rick
Hi Rick, You can still lower the effect of the Windfall Elimination Provision (WEP). In fact, even if you’re drawing Social Security benefits, your benefit rate could be recomputed if you continue working and earn enough to increase your benefit rate. Social Security retirement benefits are based on an average of a person’s highest 35 years of wage-indexed earnings, and those years can be replaced by higher earnings years no matter how long you continue to work. And if you have between 20 and 30 years of “substantial covered earnings” as defined in the Windfall Elimination Provision (WEP), your benefit rate can be recomputed to give you credit for additional years of substantial earnings no matter how old you are when you have the earnings.
Bills proposing to amend or repeal the WEP and Government Pension Offset (GPO) provision have been introduced in virtually every session of congress since those provisions were originally passed into law in the 1980s. The bills are usually sponsored by representatives from districts with large numbers of current and retired federal workers, and the bills never seem to receive much support from representatives from other districts. The WEP provision does affect non-federal workers as well as federal workers, but not in large enough numbers to put much pressure on congress to change the law. Therefore, I’d be very surprised if either the WEP or GPO provisions are materially amended or repealed. Best, Larry
Am I Missing Something About My Ability To File For Spousal Benefits Without Filing For My Retirement Benefits?
Hi Larry, I’ve recently called my local Social Security office to ask about clarifying what I assumed to be true about spousal benefits. From what I’ve seen online about restricted applications, I think I would not be eligible to receive my Social Security spousal benefits while letting my retirement benefits grow. I was born in 1956. But when I called my local Social Security office, they said I could in fact do this, and that it was “something else” that changed. I can’t believe they wouldn’t know about restricted application at the SSA office so am I missing something? My husband started receiving his Social Security retirement benefits of $1,400 at full retirement age. I am 64 and my estimated retirement benefits at FRA are about $1,000. Is it possible for me to maximize my benefit in any way, and still have some money coming in before 70? Thanks, Megan
Hi Megan, You aren’t misunderstanding the rules, and no, you could never file just for spousal benefits while letting your own Social Security retirement benefit rate grow.
No one born after 1/1/1954 is permitted to file just for spousal or divorced spousal benefits on the Social Security record of a spouse without also being deemed to be filing for their own Social Security retirement benefits at the same time. So you would never be able to file a restricted application for just spousal benefits only. If a Social Security employee told you otherwise, then you were misinformed.
If your primary insurance amount (PIA), which is equal to your own Social Security retirement benefit rate if you start drawing at full retirement age (FRA), is more than 50% of your husband’s PIA, you won’t qualify for any spousal benefits. However, if your husband dies before you and you are at least FRA, though, you would be eligible for the higher of your own benefit rate or your widow’s benefit, which would be equal to your husband’s retirement benefit rate.
You may want to consider using our software — Maximize My Social Security or MaxiFi Planner — to compare your filing options so that you can make the best possible decision about when to file for 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
Can I Draw My Social Security Now And Can My Wife Draw Then Draw Her Spousal Benefit?
Hi Larry, My birthday is in 12/1952 and my wife’s birthday is in 7/1953. I’ve been told that I can draw my Social Security retirement benefit now and then my wife can draw her spousal benefit as well without filing for her own retirement benefit. I was also told that I could also file retroactively a couple months. Is that true? Thanks, Stephan
Hi Stephan, Actually, since you reached your full retirement age (FRA) of 66 in 12/2018, you could file for your Social Security retirement benefits up to six months retroactively. Furthermore, since your wife was born prior to 1/2/1954, she could file a restricted application just for spousal benefits only while allowing her retirement benefit rate to grow until 70. Your wife could also claim spousal benefits up to six months retroactively, but no earlier than your first month of entitlement to your retirement benefits.
Your wife’s spousal rate would be equal to 50% of your primary insurance amount (PIA), and your PIA is equal to your Social Security retirement rate if you had started drawing at FRA. Your monthly benefit rate would be higher than your PIA, though, since you’ll receive delayed retirement credits (DRCs) for the months that you didn’t claim benefits starting with the month you reached FRA. So your wife’s spousal rate would be somewhat less than 50% of your actual benefit amount. Best, Larry
If I Do A Protective Filing Within 17 Months Of My Disability Onset Can I Collect A Lump Sum Payment Of SSDI Starting With My Onset Date?
Hi Larry, This question deals with protective Social Security disability filing. Do I understand correctly that if I do protective filing at the end of 17 months after onset of disability date, it would allow me to have up to six months extension to collect the retroactive SSDI benefits? In other words, if my onset of disability was on October 29, 2018 and I did protective disability filing on March 29, 2020 (17 months later) and then I follow up with “real” disability filing by September 29, 2020 and my claim is approved, would I then be able to collect a lump sum starting from October 29, 2018 to the date of my claim approval? Thanks, Jack
Hi Jack, In your example, you wouldn’t lose any retroactive benefits if you established a protective filing date in March 2020, but your back pay wouldn’t start with your disability onset date. There is a five full calendar month waiting period from a person’s date of onset to their initial date of entitlement to Social Security disability (SSDI) benefits, so if your onset date is 10/29/2018, your first potential month of SSDI benefit entitlement would be for the month of 4/2019. No payment would be due for the five month waiting period (i.e. 11/2018 through 4/2019).
SSDI benefits can be paid retroactively for up to 12 months prior to a person’s filing date for SSDI. And if you establish a protective filing date and follow up by filing an actual application within six months of the protective filing date, your protective filing date would be considered as the date you applied for benefits. Therefore, if your earliest possible disability onset date is 10/29/2018, you could have applied or establish a protective filing date for SSDI as late as 4/30/2020 without any potential loss of benefits.
A protective filing date can potentially be established either by submitting a signed statement to Social Security, making an appointment with Social Security to apply for benefits, or by initiating an online application. Regardless of which method you choose, though, you’ll want to make sure that Social Security acknowledges your protective filing date by sending you a 6-month closeout letter. Best, Larry