Economic Security Planning, Inc.
Today’s column addresses questions about earning delayed retirement credits (DRCs) while not working or claiming benefits, potential strategies for a married couple to maximize their benefits and potentially available survivor benefits. 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.
Ask Larry: Will My Social Security Retirement Benefit Increase If I Don’t Work Or Take Benefits?
Hi Larry, If I am not working and not getting my Social Security retirement benefit yet, does the amount I will later receive still go up by 8% a year? Thanks, Bill
Hi Bill, If you’re eligible for Social Security retirement benefits but you haven’t started drawing them and if you’re between full retirement age (FRA) and age 70, then yes your benefit rate would increase by 8% per year (i.e. 2/3rds of 1% per month) until you reach 70 unless you start drawing your benefits before then. Those increases are caused by delayed retirement credits (DRCs), and you don’t need to be working in order to accrue DRCs.
If you aren’t yet FRA yet, then your benefit rate would not increase by 8% per year if you aren’t working. Social Security retirement benefits are reduced at an annual rate of 5% to 6 & 2/3rds% per year if you start drawing prior to FRA, so you can avoid those reductions by not drawing your benefits early. However, the resulting increase in your eventual benefit rate between ages 62 to FRA amounts to somewhat less than 8% per year.
You may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to explore your options. The software allows you to analyze your options based in part on your presumptions about the future, such as your and your wife’s maximum lifespans, which should allow you to 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
What Is The Best Strategy For My Wife And I To Maximize Our Social Security Benefits?
Hi Larry, I just turned 69 and my wife just turned 68. Neither of us have filed for any Social Security Benefits. Both born before 1953. I have a larger PIA than my wife. What is the best strategy for us to maximize our Social Security benefits? Thanks, Anthony
Hi Anthony, The answer to your question depends largely on the comparative rates of your primary insurance amounts (PIAs), which are equal to your full retirement age (FRA) retirement benefit amounts. If your wife’s PIA is relatively close to yours, then it might be best for both of you to wait until 70 to start drawing. But if your wife’s PIA is less than half as much as yours, it would almost certainly be optimal for her to apply for her own Social Security retirement benefits as soon as possible, and for you to file a restricted application for spousal benefits on her record. Both of you could claim those benefits retroactively for up to six months. You could then switch to drawing your own higher retirement benefits at 70, and your wife could potentially claim an excess spousal benefit from your record.
However, if your wife’s PIA is more than half of your PIA, then it’s more of a judgment call on whether or not she should start drawing prior to 70 so that you can collect spousal benefits. Filing prior to 70 would of course allow you both to collect benefits sooner, but your wife would then be stuck with a lower monthly rate for as long as both of you are living. But if you die before your wife, she’d be eligible for the higher of your benefit rate or her own benefit rate, so your wife would still get your full higher rate as a widow regardless of when she starts drawing her own benefits. Best, Larry
Will I Still Qualify For Spousal Benefits From My Deceased Husband?
Hi Larry, My husband of 39 years passed away three years ago. He was on disability for MS. I was 57 at the time and was not eligible for spousal benefits. I remarried a year ago and recently got divorced. I will be 60 in September. Will I still qualify for spousal benefits from my husband? Thanks, Roberta
Hi Roberta, I’m sorry for your loss.
Yes, it sounds like you would likely meet the requirements for reduced widow’s benefits as early as 60. A subsequent remarriage does not disqualify a person from qualifying for widow’s benefits as long as the remarriage has either ended, or if the person remarried at age 60 or later.
Your best filing strategy is almost certainly either filing for reduced widow’s benefits early and then switching to your own record at 70, or filing for reduced retirement benefits on your own record early and then filing for unreduced widow’s benefits at full retirement age (FRA). Normally, you would want to start out drawing the lower benefit first and then switch to the higher record when it reaches its highest potential rate. Best, Larry