Today’s Social Security column addresses questions about benefit rates after applying for but not receiving early benefits due to the earnings test, reporting foreign pensions and when it might be advisable to apply for benefits given an age difference between spouses. 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.
Am I Really Stuck With My Age 62 Social Security Retirement Benefit Rate?
I applied for my Social Security retirement benefit at 62 and also child benefits for my two minor daughters. I was actually only interested in receiving benefits in the event of a major alteration in my ability to work. As it turned out, my daughters, who are adopted, were denied because of a particular proof of citizenship Social Security required that was not required for adoption.
I assumed the application would not remain in effect. Sometime later I was advised my benefits would be suspended since I continued to work. Since I was not receiving benefits and never have, I was not concerned about looking into it further.
However, I am now being told that my benefits may be impacted. I am now 66. Even though I have never received benefits, I was told by a Social Security representative that my benefit now will be the same amount it would have been at 62. I am still not interested in receiving the benefits.
I am hoping to continue working. An agent recently told me that I would not be eligible to increase my benefits by waiting until I am 70 unless I withdraw my application. Of course withdrawal is only allowed within the 12 months after initial application, Apparently all that I have paid into Social Security in over the last 4-5 years is of no consequence. This does not seem right. Thanks, Carla
Hi Carla, The agent who told you that you’d have to withdraw your application in order to delay starting your benefits until 70 was, at a minimum, not giving you the full story. What you can do instead is request voluntary suspension of your benefits starting with the month you reach full retirement age (FRA).
In order to suspend your benefits in the earliest possible month though, you need to submit your request to Social Security no later than the month prior to the month you reach your FRA. You can suspend your benefits at any point between FRA and 70, but no sooner than the month after the month you submit the suspension request.
Voluntary suspension requests can be submitted either verbally or in writing. So if you call Social Security and they tell you that you can’t suspend your benefits then you should submit your request in writing. You can submit your written request to your nearest office by mail using a form SSA-795.
One thing you can’t do though, is voluntarily suspend your benefits for any months prior to the month you reach FRA. So if your earnings end up being low enough to allow you to be paid for any months prior to your FRA, your permanent benefit rate will suffer at least somewhat due to those payments. You won’t be stuck with your age 62 rate, though.
At some point after you reach FRA, Social Security should adjust your benefit rate to remove the reduction applied for any months that you weren’t paid benefits prior to FRA due to your earnings. That could restore your benefit rate to your full unreduced amount provided that you aren’t paid benefits for any months prior to your FRA. Best, Larry
Do I Have To Report My German Pension To Social Security?
Hi Larry, I started receiving Social Security and due to small amount, I also receive an excess spousal benefit to make my total spousal benefit 50% of my husband’s benefit. Now I can apply to receive my small Social Security benefit from Germany.
I don’t want to lose what i worked for in Germany. Do I have to report my German benefit to Social Security here? Will I still be able to keep spousal benefit? Thanks, Almut
Hi Almut, Yes, you must report to Social Security that you’ve started receiving a pension from Germany, assuming that the pension is based on your own work and earnings. If that’s the case, then your own Social Security retirement benefit amount could be reduced due to the Windfall Elimination Provision (WEP).
But since you’re eligible for spousal benefits, if your own benefit rate is reduced due to the WEP, then your spousal benefit will increase. The increase in your spousal rate should offset most if not all of the reduction in your own benefit rate.
If you started drawing US Social Security benefits at full retirement age (FRA) or later, then your German pension should result in no more than a $1 reduction in your combined US benefit rate. But if you started drawing your US benefits before FRA, then your combined rate could go down a bit more than $1. Best, Larry
When Should My Wife Start Drawing?
Hi Larry, I will turn 70 next month. My wife turns 62 ten years from now. I will start collecting Social Security benefits next year. When should she start collecting? Thanks, Brad
Hi Brad, The answer to your question depends in large part to your and your wife’s comparative benefit rates, assuming that your wife is insured for benefits on her own account. If your age 70 rate is higher than your wife’s age 70 rate, then she may want to at least consider starting her benefits as early as age 62.
The downside of that would be that she’d then be stuck with a reduced benefit rate for as long as both of you are living. However, if you die before her and if your wife is at least full retirement age when she claims widow’s benefits, she could then be paid the higher of her own benefit rate or your full benefit amount. That means she could then be paid up to your full age 70 rate as a survivor, assuming that you wait until then to start drawing your benefits.
At some point before she applies, your wife may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to ensure your household receives the highest lifetime benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Our software can also confirm your correct benefit amount, ensuring you aren’t being paid too little or too much, which could lead to potential clawbacks due to Social Security’s overpayment to you. Best, Larry