Today’s Social Security column addresses questions about how spousal benefits are calculated, survivor’s benefits after taking reduced retirement benefits and earnings credits when self-employed. 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.
How Much Will My Wife’s Social Security Spousal Benefit Be?
Hi Larry, My wife is two years older than I am and has been receiving Social Security from her work history for the past two years. I am retiring and have received a benefits letter for Social Security stating my benefit amount. Where can I find out what her increase will be, as I was the primary wage earner? Thanks, Doug
Hi Doug, First of all, your wife would need to file an application in order to be able to collect spousal benefits. And she’ll only qualify for spousal benefits if your primary insurance amount (PIA) is more than twice as much as her own 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).
If your wife does qualify for spousal benefits, her unreduced spousal rate would be calculated by subtracting her PIA from 50% of your PIA. But, if she starts collecting her spousal benefits prior to her full retirement age (FRA) then her benefit rate will be reduced for age.
You may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to calculate how much, if any, that your wife could be paid as a spouse and 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
Can I Collect My Social Security At 62 And Then Switch Over To My Deceased Husband’s Record At FRA?
Hi Larry, I will turn 62 this October. Can I collect my Social Security retirement benefit early and then when I reach FRA at 67, can I switch over and collect my widow’s benefit? I never made much money. I believe that his would grow if i wait until my FRA. I do not know if he started taking his Social Security early. Would this make a difference? Thanks, Joan
Hi Joan, You could claim your own retirement benefits at 62 and wait until your full retirement age (FRA) to claim unreduced widow’s benefits, but if you’re still working and if you earn too much then some or all of your benefits may need to be withheld because of Social Security’s earnings test.
It would change your optimal filing strategy if your husband collected reduced Social Security retirement benefits prior to his death. If he did, then your maximum widow’s rate would be limited to the higher of his reduced benefit rate including any Social Security cost of living (COLA) increases that occurred after his death, or 82.5% of his primary insurance amount (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).
You should be able to find out from Social Security whether or not your husband collected reduced retirement benefits prior to his death. If he did, then instead of waiting until your FRA to claim widow’s benefits, you’d almost certainly want to claim them at some point before then.
The bottom line though is that if you’re positive that your own benefit rate would be lower than your widow’s rate even if you waited until 70 to claim your benefits, then your best filing strategy would likely be to claim your own retirement benefits at 62 or as soon as your earnings will permit at least some benefits to be paid, then file for widow’s benefits when your widow’s rate reaches its maximum rate. Best, Larry
How Can My Wife Earn Social Security Credits?
Hi Larry, I am a naturalized senior citizen and am self-employed as a consultant with a registered sole proprietorship. I pay self-employment Social Security taxes that earn me quarterly credits. How can my wife, who is also qualified in my field and helping in my work, become eligible to earn Social Security credits? We file under MFJ, but I have not paid her separately for services. Thanks, Nicolò
Hi Nicolò, I don’t have sufficient facts to be able to give you any specific advice, but a person can earn Social Security quarters of coverage either by earning wages or by paying self-employment taxes. You could potentially pay your wife a salary, but you’d then need to have an employer identification number (EIN), and you’d need to withhold and pay the appropriate Social Security taxes and matching employer taxes.
Alternatively, your wife could pay self-employment taxes on income she produces as a sole proprietor or as a partner in a partnership. To get Social Security credits based on self-employment though, your wife would need to pay the self-employment taxes under her own Social Security number. Self-employment taxes are calculated and reported on Schedule SE of a person’s tax return. Best, Larry