Ask Larry: Will The Earnings Test Reduce My Social Security Retirement Benefits?

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Today’s column addresses questions about whether the earnings test would reduce retirement benefits, retirement benefits before survivor benefits, benefits based on a common law marriage and whether an divorced spouse could be eligible for survivor 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.

Will The Earnings Test Reduce My Social Security Retirement Benefits?

Hi Larry, I am past my full retirement age and continue to earn income from various consulting projects. I am thinking of filing for Social Security retirement benefits since my business is slow to non-existent. Is there a maximum annual earning amount penalty, and will my benefits continue to increase until 70 if I continue to have annual income. Thanks, Rick

Hi Rick, Since you’re at least full retirement age (FRA), there is no limit on how much income you can have and still be able to draw all of your benefits.

Your benefit rate could potentially increase following any year you have earnings, regardless of your age at the time of the earnings. However, Social Security retirement benefits are based on an average of a person’s highest 35 years of wage-indexed earnings on which they paid Social Security taxes, so your benefit rate would only increase if you earn more in a year than you did in one or more of your previous highest 35 wage-indexed earnings years.

Whether or not you continue working, your benefit rate would grow by 8% of each year that you don’t draw benefits between FRA and 70. However, you would stop earning those increases as soon as you start drawing your Social Security retirement benefits.

Before deciding on when to start drawing your benefits, you can consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to see what filing options you have and how you can get the highest benefit totals available. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

Can I File For My Own Social Security Retirement Benefit Now And Then Switch To My Widow’s At Full Retirement Age?

Hi Larry, My husband passed away in 2018. I am going to wait until full retirement age, 66 & 2 months, to collect my widow’s benefit. I am currently 63. Can I collect my own Social Security retirement benefit now and then switch to my widow’s benefit at full retirement age? I need the higher amount at retirement and don’t want to jeopardize losing that option. Thanks, Sharron

Hi Sharron, I’m sorry for your loss.

You couldn’t technically switch to drawing just widow’s benefits after you’ve started drawing your own benefits, but you can file for your own benefits now and then file for unreduced widow’s benefits at your full retirement age (FRA). The net effect would be the same if your widow’s rate is higher than your own retirement benefit rate, though, because once you filed for the widow’s benefit at FRA, your combined benefit rate would be equal to your higher widow’s rate.

For example, say you filed for your own benefits at age 63 and were due $1,000 monthly. If your unreduced widow’s rate was $2,000 for example, you could then file for widow’s benefits at FRA and be paid your own $1,000 plus a partial widow’s rate of $1,000 (i.e. the difference in the two rates), giving you a combined benefit rate equal to the full higher widow’s rate.

However, if you’re still working, at least some of your benefits might need to be withheld due to the earnings test until you reach FRA. In 2020, you can earn up to $18,240 without losing any benefits, but Social Security would need to withhold $1 for each $2 you earn in excess of that amount.

Normally, you would want to start out drawing the lower benefit first and then switch to the higher record when it reaches its highest potential rate. Best, Larry

What Can I Do To Get Benefits From The Record Of My Common Law Spouse?

Hi Larry, I was common law married in Pennsylvania since 1991. We were together for 31 years and raised a family. We split and I moved to another state. I’ve applied three times and have been refused. They won’t even get back to me. I will be 67 this year and if accepted, will pay more for Medicare. I’ve called the main office and my local. They’re telling me to appeal for the second time. What options do I have? Thanks, Pat

Hi Pat, If you’ve applied for benefits and your claim was disallowed, your only options are to file an appeal or file a new claim. Appeals must normally be filed within 60 days of your disallowance notice, and there are several levels of appeal that can be pursued. It’s generally better to pursue the appeals process at least through the hearings level as opposed to filing a new claim, because doing the latter is like starting from scratch.

I can tell you that’s it’s difficult at best to establish proof of common law marriage, and if your spouse is still living and doesn’t support your claim of a common-law marriage, then you’ll be fighting an uphill battle. Social Security follows the laws of the individual states in establishing common law marriages. Best, Larry

If I Die Will My Ex Be Able To Draw From My Social Security?

Hi Larry, I’ve been divorced since 1991. I’m retired now and 67 years old. We were married for 15 years. If I die, will my ex be able to draw a survivor’s benefit from my record? Thanks, Jesse

Hi Jesse, Potentially, yes, but your ex could only qualify for survivor benefits from your record if they are unmarried, or if they got married at 60 or later. Also, your ex would need to be at least 60, or at least 50 and disabled, in order to qualify for survivor benefits, and they are already drawing their own retirement benefits, they’d only be eligible for survivor benefits if the survivor rate is higher than their own benefit rate. Best, Larry

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