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Ask Larry: Does A Possible Drop In The 2020 AWI Mean I Should I File Retroactive To 2021?

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Today’s Social Security column addresses questions about what effects a potential drop in the 2020 Average Wage Index might have on benefit amounts and timing, survivor’s benefits and the earnings test and when first checks can start and when they’ll arrive. 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.


Does A Possible Drop In The 2020 AWI Mean I Should I File Retroactive To 2021?

Hi Larry, I have long planned to start my Social Security retirement benefits in January 2022 when I turn 70. But I am now concerned about the possible drop in the Average Wage Index from 2020 and its impact on my monthly benefit calculation.

Would it be better to start my benefits this month or should more month retroactively to 12/2021 to avoid possible negative effects? Thanks, Mark

Hi Mark, The 2020 average wage index (AWI) would have no impact on the amount of your benefits. The only people whose benefits may be affected by a drop in the 2020 AWI are people who turn age 62 in 2022.

Since you were born in 1952, your benefit rate is calculated based on the AWI in the year 2012. Starting your benefits a month early would just cause you to get a lower monthly benefit rate.

You may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — 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. Best, Larry


Will I Be Able To Collect A Social Security Widow’s Benefit If I Earn $40,000 This Year?

Hi Larry, I am a widow and my income this year will be about $40,000. I will turn 60 later in January. Will I be able to collect at least part of my Social Security widow’s benefit and stay at the same income? Thanks, Lucy

Hi Lucy, You can potentially qualify for widow’s benefits as early as the month you turn 60, but whether or not you could collect benefits depends on the amount of your benefit. If you file for widow’s benefits at 60 your benefit rate is calculated at 71.5% of your deceased spouse’s primary insurance amount (PIA), which is equal to his full retirement age (FRA) retirement benefit amount).

The Social Security earnings test exempt amount in 2022 is $19,560. If you earn $40,000, Social Security would then need to withhold $1 for every $2 that you earn in excess of the exempt amount. So if your annual benefits amount to more than the amount that’s required to be withheld, you could be paid some benefits this year.

Your best filing strategy could be either filing for reduced widow’s benefits early and then switching to your own record at 70, or filing for reduced retirement benefits on your own record early and then filing for unreduced widow’s benefits at full retirement age (FRA). 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


Is It Correct That My First Check Will Arrive In April Instead Of March?

Hi Larry, I will turn 62 in February. I applied for my benefits a few months ago and I requested that my benefits to start in February but Social Security stated that my first check will arrive in April instead of March. Is that correct? Thanks, Leah

Hi Leah, Yes, assuming that you’re claiming Social Security retirement benefits based on your own work history. The earliest that a person can qualify for retirement benefits is the first month that they are 62 for a whole month, which in your case is March.

You must be at least 62 for a full month in order to qualify for Social Security retirement benefits. Social Security pays benefits a month behind, so your payment for March will be due in April. Best, Larry


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