Ask Larry: Will Stopping Work After Drawing Social Security Retirement Benefits Change My Rate?

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Today’s column addresses questions about working after beginning benefits, accidentally filing earlier than intended, spousal benefits on a disabled worker’s record, restating suspended benefits and the possibility of filing retroactive SSA taxes. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc, a company that markets Maximize My Social Security and MaxiFi Planner.

See more Ask Larry answers here.

Ask Larry about Social Security here.


Will Stopping Work After Drawing Social Security Retirement Benefits Change My Rate?

Hi Larry, I began receiving my Social Security benefits eight years ago, which left me with a reduction in pay. However, I have continued to work even through to now. So I am continuing to pay into Social Security and do not see myself retiring for at least another three or four years. What is the possibility of my Social Security monthly benefits changing when I fully retire? Thanks, Ronald

Hi Ronald, Your benefit rate could increase as a result of your ongoing earnings, but only if you earn more in a year or years than you did in one or more of your previous highest 35 years of wage-indexed earnings that were used to calculate your current benefit rate. Social Security retirement benefits are based on an average of a person’s 35 highest years of wage-indexed earnings, and can be recalculated at the end of each year in which they have higher earnings.

Therefore, if your earnings in any year are higher than in one of your previous 35 highest years, you wouldn’t have to wait until you fully retire in order to receive a benefit increase. Social Security does these types of benefit increases automatically, so you shouldn’t need to do anything to receive an increase if one is due. However, if you want to check to see if you’re eligible for an increase you could submit proof of your most recent year’s earnings to Social Security and request a manual recomputation. Best, Larry


What Do I Do Now?

Hi Larry, I received a letter from Social Security stating that I was getting ready to turn 70 in December and I should come into the office. Last September I talked to the representative and got some options. The representative told me she would send me a paper in the mail letting me know how much I would receive from the SSA. I never applied for Social Security benefits. Or at least I didn’t mean to. I did give her my bank information. I was getting ready to pay my monthly bills and checked my banking account in October and to my surprise Social Security had deposited a check of more than $17,000. I was trying to wait until my 70th birthday which was still two months away. What do I do? I wanted to wait until I am 70 and I did not fill out an application. Iliana

Hi Iliana, It sounds like you must have applied for benefits without realizing it. You don’t have to complete any forms in order to apply for benefits when you file in person at a Social Security office. Instead, a Social Security claims representative asks you a series of questions and completes an electronic application for you. The claims representative should, however, have given you a copy of the completed application and asked you to attest to the information at the end of the interview.

Assuming that you did accidentally file for benefits during your recent interview and chose to accept retroactive benefits, you can either a) ask to change your month of entitlement to the month you turn 70, or b) withdraw your application and reapply effective for the month you reach 70. Either way, you’d need to recontact Social Security and repay any Social Security benefits that you’ve been paid so far. Changing your month of entitlement would probably be the easier of the two options, which you can do by contacting Social Security. You will need to sign a written request to change your month of entitlement, but the Social Security claims representative who you speak with can give you the appropriate form. Best, Larry


Could My Wife Get Spousal Benefits Based On My SSDI?

HI Larry, I am 54 and on SSDI. My spouse is 64 and working. Can she get a spousal benefit from my SSDI, and can she do this while working? We don’t know if this is possible but her plan has been to file and suspend at 66 so she can collect the maximum amount at 70. My understanding is that my SSDI will convert to retirement at 67. She will be on her maximum Social Security by then and we also have supplemental retirement investments to help support us. Could I suspend my Social Security retirement benefit after it converts from SSDI to try to maximize my benefit? Thanks, Travis

Hi Travis, Since your wife was born after 1/1/1954, she could never file just for spousal benefits without also being required to file for her own Social Security retirement benefits at the same time. And she could only qualify for spousal benefits if your full Social Security disability benefit rate, which is equal to your primary insurance amount (PIA), is more than twice as much as your wife’s full retirement age rate (FRA), which is her PIA.

If your wife files for benefits before reaching FRA, her benefit rate will be reduced for age whether she qualifies only for her own benefits or for a combined amount from her own record and from your record. And her benefits could be subject to full or partial withholding until she reaches FRA if she earns more than the Social Security earnings test exempt amount (i.e. $17,640 in 2019). Your wife may want to strongly consider using one of my company’s two tools — Maximize My Social Security or MaxiFi Planner — to explore and compare her options so that she can choose the best possible strategy for claiming her benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care.

You’re correct that your Social Security disability benefit will automatically convert to regular Social Security retirement benefits when you reach your FRA of 67. You could then choose to voluntarily suspend your retirement benefits in order to accrue delayed retirement credits (DRCs), which would increase your benefit rate by as much as 24% if you don’t reinstate your payments until you reach 70. Best, Larry


How Can I Start Up My Benefits?

Hi Larry, In 2016, when I was 66, I filed and suspended my Social Security benefits. I am now about to turn 70 and am trying to reinstate them. My local Social Security office seems to say that I have to go through the whole filing process again. I had hoped that there would be a way they could simply, so to speak, flip a switch administratively to start my payments. Isn’t there an abbreviated way to start payments, since I already filed in 2016? If so, can I do it online, or must I go in to the local office? Being able to do it online would help since there is a backlog for appointments at the local office. Thanks, Gabrielle

Hi Gabrielle, If you’re certain that you filed for and suspended your benefits, you shouldn’t need to do anything to start up your benefits at 70. Social Security automatically reinstates suspended benefits effective the month that a person reaches 70, but only if they really have voluntarily suspended benefits that they’ve filed for and been awarded.

There seems to be a lot of confusion about what filing for and suspending benefits actually means, so if Social Security has advised you that you still need to apply for benefits then you should probably verify your status. If you have in fact filed for and suspended your retirement benefits, you should have an established master beneficiary record (MBR) on file at Social Security, and your payment status would show “suspended.” You should be able to confirm that by calling Social Security or by visiting one of their offices.

If no MBR has been established for you, you would still need to file an application for your benefits, which you should be able to do online. However, if you’ve previously filed an application with Social Security even just for Medicare only, then you’ll likely need to call or visit an office in order to apply for your Social Security benefits. Best, Larry


Can My Husband Pay Social Security Taxes For The Last Five Years Retroactively?

Hi Larry, My husband was self-employed for five years and filed taxes for those years, but did not pay his Social Security taxes. Is there a way to pay them retroactively? Thanks, Faith

Hi Faith, Well, first off your husband would need to have had a net profit of at least $400 in one or more of those years to owe self-employment (i.e. Social Security) taxes. If he didn’t, he couldn’t pay self-employment taxes on a voluntary basis in order to earn Social Security credits.

If your husband didn’t report a self-employment profit and he actually did have a profit in any of the years in question, then he could file amended tax returns for those years. But he could only potentially get Social Security credits for the years 2016-2018. Credit for any earlier tax years would be barred by the statute of limitations, which limits credit for newly reported earnings to tax years that ended within 3 years, 3 months and 15 days of the filing date of the amended return. Best, Larry


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