Ask Larry
Economic Security Planning, Inc.
Today’s column addresses questions about how vacation pay can be counted regarding the earnings test, whether benefits for a disabled child are automatic or must be separately filed for and whether restricted application must be made in person or can be done online. 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.
Wasn’t My December Vacation Pay Exempt From Social Security’s Earnings Test?
Hi Larry, I retired on December 15 and I received my first Social Security check the 3rd week of January. I was told that I could only make around $1,500 in December in order to get my full retirement benefit check in January.
I figured out I would be making too much money but then I was told that if I took a couple of days of vacation, that the vacation pay would not count toward that $1,500. Is that not correct?
I also get a travel reimbursement for days worked if I want it. Would this travel reimbursement count toward the $1,500? Thanks, Howard
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Hi Howard, Your vacation pay would definitely count as earnings for purposes of Social Security’s earnings test.
Vacation pay can sometimes be considered as having been earned in a different month than the month in which it’s paid, but if you were still working in December and if you received vacation pay in that month, then it would count toward your earnings limit for December.
Being reimbursed for travel expenses normally wouldn’t count as earnings, so that would likely wouldn’t be a problem However, if your employer deducts Social Security taxes from your travel pay, then that means they consider the payment to be earned income, which would make it countable for Social Security earnings test purposes.
By the way, assuming that you were under full retirement age (FRA) for the entire calendar year of 2020, then the exact amount that you were allowed to earn in December and still qualify to be paid benefits for that month based on Social Security’s monthly earnings test is $1,520.
If you earn even a dollar more than that you’ll lose your entire monthly Social Security payment for that month unless you qualify to be paid based on the calendar year earnings test. Best, Larry
Will My Daughter’s CDB Application Be Triggered By My Wife Listing Her On Her Application?
Hi Larry, It is not clear to me whether or not an adult child’s CDB application would be automatically made by virtue of my wife filing for retirement benefits and listing our daughter as being disabled prior to age 22 on the retirement application. Our daughter is receiving Supplemental Security Income.
Or is the CDB application not automatic due to her mom’s application and therefore an additional step needs to be taken to apply separately for our adult disabled child’s CDB benefits. Thanks, Carl
Hi Carl, The act of listing your daughter on your wife’s application would be classified as a protective writing, but a separate application for childhood disability benefits (CDB) would still be needed in order for your daughter to become entitled to CDB benefits.
Social Security should solicit the required application in response to your daughter being listed on your wife’s application, but you could initiate the CDB application process by contacting Social Security. Best, Larry
How Do My Wife And I Go About Filing For Benefits?
Hi Larry, My wife will be retiring in April 2021 and is planning to file for Social Security retirement benefit. She will be 65 then.
I plan to file for restricted application at the same time so I can let my retirement benefit increase. I just turned 67 and won’t file for it till 70. I was born in 1953 so I am eligible for that.
Does the Social Security office have to fill out those papers or can I do that on line? If so, what is the form? Also, since I have not taken my retirement benefit yet, isn’t the amount suppose to go up by 8% each year that I delay? I just looked at the statement and it showed a much lower increase. Thanks, Joseph
Hi Joseph, The paper application form numbers for Social Security retirement and spousal benefits are SSA-1 & SSA-2 respectively, but Social Security no longer uses paper forms nor form numbers as a reference. You and your wife could probably file for benefits online at ssa.gov or you could call Social Security to make an appointment to file by phone or in person. If you file by phone or in person, a Social Security claims representative will complete the necessary applications for you.
Before filing, though, you and your wife may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to fully explore what options you may have and make a sound decision about how to file to get the most our of Social Security for you. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care.
If you apply for spousal benefits online, there should be a question on your application that asks you if you want to defer filing for your own retirement benefits, which you’d want to answer “yes.”
You can also add a statement in the remarks section stating: “I wish to restrict the scope of this application to spousal benefits only.” You don’t need to say anything about when you want to claim your retirement benefits. You will be required to file a separate application form when you want to file for your retirement benefits.
I don’t have enough information to answer your question about the benefit estimate you received, but you will receive delayed retirement credits (DRCs) for every month that you don’t collect your Social Security retirement benefits from your full retirement age (FRA) until 70. DRCs increase your benefit rate by 2/3 of 1% per month, or 8% per year. Best, Larry