Today’s column addresses questions about the earnings test and independent contractors, whether early reductions to disabled widow’s benefits are permanent and the possibility of taking spousal benefits only after early retirement benefits. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc.
See more Ask Larry answers here.
Have Social Security questions of your own you’d like answered? Ask Larry about Social Security here.
Can I Collect Social Security Benefits If I Retire And Work As An Independent Contractor?
Hi Larry, I am considering retiring from my career job at 63 and becoming an independent contractor delivering campers across the country. My Schedule C income would be under $19,000 with a lot of deductions. Can I still collect my Social Security retirement benefit if I do this? Thanks, Jeff
Hi Jeff, You wouldn’t necessarily need to be retired to start collecting Social Security benefits, but Social Security would need to withhold $1 of your benefits for every $2 that you earn in excess of $18,960 in 2021. And even if you don’t claim benefits until the middle of the year, your earnings from January through December count toward the earnings limit.
Countable earnings include any combination of gross wages and net earnings from self-employment. Your best filing strategy depends on a number of different factors, so you may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to fully analyze the options available to you in order 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
When I Turn 66 Will I Still Get My Husband’s Reduced Amount Instead Of His Full Amount?
Hi Larry, I am 65, disabled, and have been collecting SSDI. I started getting survivor benefits at 57. My husband died at 42 and never collected his Social Security retirement benefit. When I turn 66, will my survivor’s benefit still be reduced? Thanks, Marcy
Hi Marcy, Assuming that you started drawing Social Security disability (SSDI) benefits prior to or at the same time as when you started drawing widow’s benefits, then your widow’s rate should be recalculated the month you reach full retirement age (FRA) to remove any reduction for age.
The processing of that recalculation may not happen immediately when you reach FRA, but when it is processed, Social Security should make up any shortage of benefits you’re paid starting with the month you reach FRA.
Just to clarify, when you’re already drawing SSDI benefits and you become eligible for disabled widow’s benefits (DWB), your DWB rate is reduced for age by 28.5% if you start drawing DWB prior to age 60.
That 28.5% reduction is then removed at FRA for people whose entitlement to SSDI preceded or started concurrently with their entitlement to DWB. That results in the person being paid their spouse’s full PIA assuming that the deceased spouse died prior to FRA and they didn’t collect reduced retirement benefits prior to their death.
To be clear, though, the surviving spouse could be paid no more than the higher of their own benefit rate or their spouse’s full rate, not both. Best, Larry
Can My Wife Suspend Her Account And Take Spousal Benefits Instead?
Hi Larry, Can wife suspend her account and take spousal benefits? She was born in 1953 and I was born in 1955. She started collecting her Social Security retirement benefit at 62 and I will file at FRA and suspend until later date.
Can my wife suspend her benefit and file for spousal benefits when I file? If so, will her benefit equal 50% of my benefit at my FRA? Thanks, Vito
Hi Vito, Starting with 4/30/2016, if a person suspends their own Social Security retirement benefits they can’t be paid any other type of Social Security benefits they qualify for during the time that their own benefits are suspended.
People born prior to 1/2/1954 can still potentially claim just spousal benefits only at full retirement age (FRA) or later without claiming their retirement benefits until later, but once you’ve started drawing your own benefits, you can’t suspend those benefits and collect a different type of Social Security benefits instead.
Your wife could potentially claim an excess spousal benefit when you start drawing your benefits, but only if your primary insurance amount (PIA) is more than twice as much as your wife’s PIA. A person’s PIA is equal to their Social Security retirement benefit rate if they start drawing their benefits at full retirement age (FRA).
And even if your wife does qualify for an additional spousal benefit, her benefit rate wouldn’t then equal 50% of your full rate. The reduction for starting her own benefits prior to FRA would continue for at least as long as both of you are living.
And note that there’s no reason for you file file for and suspend your retirement benefit at your FRA rather than simply delaying filing for it. Best, Larry