Ask Larry: When Will My Continued Income Increase My Social Security Retirement Benefit?

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Today’s column addresses questions about when benefit rate increases due to continued income are applied, spousal benefit early filing reductions, when disability benefits convert to retirement benefits, whether SSA’s estimates include COLAs and widow’s benefits before retirement 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.

When Will My Continued Income Increase My Social Security Retirement Benefit?

Hi Larry, I started receiving my retirement benefits at FRA, but am continuing to work. In theory, every year I earn higher income, one of my lower earning years should fall off. I understand that benefits get recalculated automatically every year. If I am eligible for an increase, when does that go into effect? Any clarification you could provide would be greatly appreciated. Thanks, Lucien

Hi Lucien, Social Security retirement benefits are based on an average of a person’s highest 35 years of wage-indexed earnings. Increases resulting from a year of higher earnings earned after a person initially starts drawing benefits take effect with their payment for January of the year following the year of the higher earnings. So for example, if your earnings in 2019 were high enough to increase your benefit rate, the increase would be due effective with your payment for January 2020 that’s due in February 2020.

However, due to delays in the reporting of annual earnings amounts, the automatic recomputation of benefit rates aren’t processed until around September of the year following the year with the higher earnings. Therefore, any increase due for 2019 earnings would show up in a person’s benefit amount around September 2020. But Social Security would pay any back pay due retroactive to the person’s benefit payment for January 2020. Best, Larry

Is It Correct That The Reduction For Spousal Benefits Is Based On When The Spouse Becomes Eligible For Those Benefits?

Hi Larry, Do I understand correctly that the reduction for taking spousal benefits early is based on the date that the spouse becomes eligible for the spousal benefit, not when they first file for their own retirement benefit. Thanks, Pat

Hi Pat, It’s important to understand that a person can’t file for reduced Social Security retirement benefits prior to FRA without also being deemed to be filing for spousal benefits. So the only way that a person could qualify for an unreduced excess spousal benefit after filing for their own retirement benefits prior to FRA is if the worker whose record the spousal benefits are paid on doesn’t claim their retirement benefits until their spouse is at least FRA. And any reduction for age applicable to the person’s own retirement benefit rate would continue to apply even if they later qualify for an unreduced excess spousal benefit. My company’s software— Maximize My Social Security or MaxiFi Planner — can help determine benefit amounts after filing at various dates. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

When Will My Wife’s Disability Benefits Convert To Social Security?

Hi Larry, I was born in July 1955 and I am thinking of collecting my retirement benefit at my full retirement age. My wife was born in August 1960 and is on full disability. When does my her disability convert to a Social Security retirement benefit? When can she begin collecting spousal benefits? My Social Security retirement benefit estimate is about $2,550. My wife currently receives $941 and her spousal benefit should be $1,225. Thanks, Hector

Hi Hector, Your wife’s Social Security disability (SSDI) benefits will convert to standard Social Security retirement benefits when she reaches her full retirement age (FRA) of 67. Her benefit rate won’t change as a result of the conversion, though.

She could qualify for an excess spousal benefit beginning with the later of a) the first month that you claim your retirement benefits, or b) the first month that she’s age 62 for a whole month (i.e. September 2022). However, if she starts drawing her excess spousal benefits prior to her FRA, her excess spousal rate will be reduced for age.

I should also mention that if you die before your wife and after she reaches FRA, she’d be eligible for the higher of her own retirement benefit rate or her widow’s benefit equal to your retirement benefit rate. So the longer that you wait up to 70 to start drawing your benefits, the higher her monthly widow’s benefit rate would be. Best, Larry

Does The Benefit Estimate I Get From Social Security Include COLAs?

Hi Larry, I understand that I get credit for all of the Social Security cost of living (COLA) increases that occur after I turned 62. When I view the my Social Security page and see the estimated benefits at my current age of 66, does the amount include the COLAs for the last four years or will they be added later when I claim my benefits? Thanks, Carla

Hi Carla, Social Security doesn’t include any future estimated cost of living increases (COLA) on their benefit estimates, but they do include any COLAs that have already gone into effect. So if you’re now 66, the current rate that Social Security is estimating for you should include the COLAs that have occurred since you turned 62. Best, Larry

Is It True That I Can Collect My Husband’s Benefits At 62 Then Start My Full Benefit At A Later Date?

Hi Larry, I was married for 18 years, divorced and then remarried for 6 months before my second husband died. My first husband is 66 and retired; I am 55. I recently visited a Social Security office where I was told I can collect my widow’s benefit based on my second husband’s record at 62 and then start my full retirement benefit at a later date. However, what I’ve been reading online leads me to believe something different since I was born after 1954. Can you please provide clarification on that? Thanks, Mary

Hi Mary, I’m sorry for your loss.

You can’t file for spousal or divorced spousal benefits at age 62 without also being deemed to be filing for your own Social Security retirement benefits at the same time. That’s true regardless of when you were born. People who were born prior to 1/2/1954 can file just for spousal or divorced spousal without being deemed to file for their own retirement benefits, but only if they claim the spousal or divorced spousal benefits at their full retirement age (FRA) or later.

Regardless of your birthdate though, you are allowed to file for widow’s or surviving divorced wife’s benefits as early as 60 without being deemed to have filed for your own retirement benefits. However, I don’t know whether or not you could qualify for widow’s benefits on your deceased husband’s account. You must normally have been married for at least nine months in order to potentially qualify for widow’s benefits, but there are exceptions to the duration of marriage requirement. Best, Larry

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