Ask Larry: Does Income Earned Before Filing Count Toward The Social Security Earnings Test?

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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 when the earnings test comes into effect, restricting an application to spousal benefits only online, what to do if a payee withheld benefits from the beneficiary, filing retroactively and how foreign pensions can affect Social Security benefits. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc, a company that markets Maximize My Social Security and MaxiFi Planner.

See more Ask Larry answers here.

Ask Larry about Social Security here.

Does Income Earned Before Filing Count Toward The Social Security Earnings Test?​​

Hi Larry, I am 64 and we applied using a restricted application. The first check should start in November. I have made about $14,000 this year and will continue to work some more. Does the the $14,000 I made earlier this year count towards the $17,640 I can make without being penalized or does $17,640 start after I filed. Thanks, Harry

Hi Harry, The $14,000 that you’ve already earned this year counts toward the $17,640 Social Security annual earnings test exempt amount. If your first month of entitlement is October 2019, thus meaning that your first payment would arrive in November, in order to be due all of your benefits you would need to either a) earn no more than $17,640 for the calendar year of 2019, or b) earn no more than $1,470 in any month from October through December. Best, Larry


Should My Wife Be Able To Apply For Spousal Benefits Online?​​

Hi Larry, I’m at FRA since I was born in September 1953 and I have filed for retirement benefits just in the last week at the end of September. After running our options through your software, my wife, also at FRA, is planning to file a restricted application for spousal benefits now as well. I just called SSA and was told that she couldn’t do this online and that she had to do it by phone or in person. They said that otherwise, the application will start her her retirement benefits but we want to delay those. It could take a couple of months to get an appointment. In a previous SSA call, I was told she could apply online and that in the Remarks section to add, as you mentioned in a previous answer here, say: “I am restricting my application to my spousal benefit only and I wish to exclude retirement benefits on my own record from the scope of this application.”

Do you have any additional insight into this? My sense is that this last person who said we needed to do this by phone didn’t have the right information. Thanks, Julian

Hi Julian, As a general rule it’s possible to apply for spousal benefits online, however, their are various exceptions. I don’t know of any exceptions that would apply in your wife’s circumstances, but there could be some reason of which I’m unaware.

I think it would be safe for your wife to at least try filing online, as long as she makes sure to restrict her application to spousal benefits only. There is a question on the online applications that asks: “If you are eligible for both retirement benefits and a spouse’s benefit, do you want to delay receipt of retirement benefits.” Your wife would answer that question “yes” in order to restrict retirement benefits from the scope of her application. It would also be a good idea to add a remark like the one you quoted in your question. You may want to use one of my company’s two tools — Maximize My Social Security or MaxiFi Planner — to help maximize your lifetime Social Security benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

Does A Child Who Is Now Age 18 Have Any Recourse If His Mother Didn’t Save His Social Security Benefits For Him?

Hi Larry, We have had a young man living with us since the death of his father. We are friends, not legal guardians. His father died when he was 16. He is now 18 and has asked his mother for his survivor benefits. She had never told him what his monthly payment was, but after he turned 18, he received his first check on his own for $986. When he asked his mother for the rest of his money, she claimed that there was only $3,000 of the roughly $24,000 that he should have had. She has not provided his support while he has been in our home for these two years, nor has he used or known he was using this money. Does he have any recourse? Thanks, Ginger

Hi Ginger, Possibly. It sounds like this young man should report to Social Security that his mother misused his benefits. Social Security should then conduct an investigation to see if misuse occurred, in which case the young man’s mother could be required to repay any benefits that are determined to have been misused.

Representative payees who receive benefits on behalf of minor children or incapable adults are required to use benefits for the beneficiary’s current needs, or else save the benefits for future needs. It doesn’t sound like that happened in this case. Best, Larry


Can I Collect Benefits For The Past Two Years That I Missed?

Hi Larry, One of the four requirements for collecting Social Security based on your ex-spouse as stated on SSA’s website is: “The benefit you are entitled to receive based on your own work is less than the benefit you would receive based on your ex-spouse’s work.” I called Social Security when I turned 62 but was told that my ex’s benefit was less than mine so therefore I could not collect any benefits.

SSA’s website does not state that the above requirement no longer applies when you reach full retirement age. I am now 68 and I recently learned that I could have been receiving benefits for the past two years based on my ex-spouse’s work record.

Recently, I applied for benefits and I will be collecting benefits based on my ex until I turn 70 and then will start collecting retirement benefits based on my own work record. Why doesn’t the SSA do a better job at explaining benefits? Can I collect benefits for the past two years that I missed? Thanks, Maria

Hi Maria, Part of the problem involved in your case is the general public’s unfamiliarity with Social Security’s vernacular. In Social Security language, “entitled to” basically means that you’ve filed for and currently receive benefits. That’s different than “eligible for,” which in Social Security parlance means that a person would qualify for a certain type of benefit if they chose to apply for it. Most of the general public wouldn’t recognize that distinction, of course.

It’s true that if you were drawing your own Social Security retirement benefits, i.e. you were entitled to it, you could not then qualify for lower divorced spousal benefits. So the information you read on Social Security’s website is correct as far as it goes, it’s just that it doesn’t mean the same thing to everyone. Social Security could probably do a better job of clarifying their instructions, though it is difficult to simplify legalese.

The answer to your question is that you couldn’t retroactively claim divorced spousal benefits for more than six months prior to the month of your application. An exception to that rule that might apply in your case is if you can establish that you were dissuaded from filing for benefits sooner because you were misinformed by a Social Security representative. For more information on establishing misinformation, refer to this reference from Social Security’s operations manual. Best, Larry


If I Start Drawing My Canadian Pension 5 Years Prior To Drawing My U.S. Social Security, Will The WEP Reduction Be Back Dated?​​

Hi Larry, What happens if I apply for my Canada pension when I am eligible at age 65 but wait to apply until 70 to apply for my US Social Security? My CPP is for a very small amount — approximately $1,600. I do not have enough substantial income to eliminate the WEP. Will the WEP for Social Security at 70 be calculated based on when I start receiving both pensions at the same time at 70 or will it back date somehow to factor in the CPP benefits I received from 65 to 70? Thanks, Doug

Hi Doug, Any reduction in your US Social Security benefit rate resulting from the Windfall Elimination Provision (WEP) won’t be applied until you start drawing your benefits. Even then, the WEP reduction would only be applied if you’re already drawing your Canadian Social Security pension at that time. The WEP reduction, if any, will simply lower the amount of your monthly US Social Security benefit rate when you start drawing your US benefits. You won’t be docked retroactively for any past years that you’ve drawn your Canadian pension, no matter when you started drawing the Canadian pension.

Based on the amount of your expected Canadian pension, it sounds like your US Social Security benefit will almost certainly be calculated using the WEP guarantee method. That would basically limit the amount of reduction applied to your US Social Security benefit to no more than 50% of the amount of your Canadian pension. The actual WEP guarantee formula is more complex than that, so the actual difference in your benefit rate caused by WEP probably won’t work out to precisely 50% of your Canadian pension amount. Our software is programmed to handle all WEP calculations, so you may want to strongly consider using it or other software that handles the WEP equally well to do your Social Security planning. Best, Larry

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

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