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Ask Larry: Are Waiting Until FRA Or 70 My Only Social Security Options?

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Today’s Social Security column addresses questions about filing options when not able to file a restricted application for spousal benefits only, when delayed retirement credits might be applied and how the potential effects of the Government Pension Offset. 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.

Are Waiting Until FRA or 70 My Only Social Security Options?

Hi Larry, I’m not grandparented under 2015 Social Security law changes. I’m married, have no disability, no dependent children or parents, no special qualifying circumstances for other benefits whatsoever.

With the restricted application for spousal benefits only option unavailable to me, are the only strategy options available to me to wait till FRA or better, 70 and also keep working to up the value of my benefit when I do file? Thanks, Jason

Hi Jason, Waiting as long as possible is not the only strategy, but it’s probably your best strategy assuming that your health is roughly average or better. Waiting until 70 to start drawing your retirement benefits would permit you to be paid the highest possible monthly benefit rate for the rest of your life. People can claim Social Security retirement benefits as early as 62, but the earlier you start drawing prior to 70, the lower your monthly benefit rate will be.

As for continuing to work, Social Security retirement benefits are based on an average of a person’s highest 35 years of Social Security covered wage-indexed earnings, so additional years of earnings only increase a person’s benefit rate if they’re higher than one or more of the 35 years currently being used to calculate the person’s 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. Our software allows you to enter projected future earnings so that you can determine how they might affect your benefit rate. Best, Larry

Do I Need To Remain Patient?

Hi Larry, My FRA is 66 as I was born in 1952. I claimed my retirement benefits at 67 and seven months in 2020. I have been receiving the benefit reported in my benefit statement as of January 2020. I understood the benefit would be adjusted in January 2021 to reflect the additional seven months I waited to claim benefits.

Upon my first call, the representative said the adjustment would be made in June 2021 butnothing happened. I called again in August and the rep said they are understaffed and he did not know when they would get to this.

Do you have any other info on this? This will result in a 4.67% increase. Will I receive a lump sum for the last year and change? Do I need to remain patient and trust SSA will eventually figure this out? Thanks, Harold

Hi Harold, Yes, you’re going to need patience. If you start drawing benefits between FRA and 70, Social Security initially only gives you credit for any delayed retirement credits (DRCs) that you earned through December of the year prior to the year you start collecting. Any DRCs earned in the year that you start drawing are subsequently credited starting with your payment for January of the year after the year you claimed benefits.

You’re correct that it sounds like you should have received a benefit rate increase starting with your payment for January 2021, but those types of recomputations are done using an automated procedure. My understanding is that such automated recomputations are only done every other year, so you may not actually see the rate increase until the latter part of 2023. Though you will be paid any back pay due when the recomputation is processed.

By the way, we recently received feedback from someone who filed at age 68 in September 2019, and he reports that his recomputation to credit his 2019 DRCs wasn’t processed until August 2021. He was also then paid the back pay that he was due retroactive to the beginning of 2020. Best, Larry

When I Retire From Teaching, Will My Monthly Payments Be Reduced?

Hi Larry, I have received my Social Security widow’s benefit since my husband’s death. He was disabled but had worked the minimum time that allowed him to receive benefits. I will receive a pension when I retire from teaching at a public university next year. Will my monthly checks be reduced when I do so? Thanks, Kelly

Hi Kelly, The answer is almost certainly yes, assuming that your earnings on which your pension is based were exempt from Social Security taxes.

Social Security’s Government Pension Offset (GPO) provision causes a person’s spousal or survivor’s benefits to be offset by 2/3rds of the amount of their government pension, provided that the person is drawing the pension and if they didn’t pay Social Security taxes on their government earnings.

In other words, if 2/3rds of the full amount of your pension is higher than your Social Security survivor benefit rate, then it sounds like your survivor benefits will likely be reduced to zero.

Assuming that you didn’t pay Social Security taxes on your earnings, be sure to notify Social Security when you start drawing your pension so that they can make any necessary adjustment to your survivor’s benefits. Best, Larry

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