How could an application at 70 increase my pension benefit from social security?
How could an application at 70 increase my pension benefit from social security?

How could an application at 70 increase my pension benefit from social security?

Today’s Social Security column addresses questions about how a delay in applying for up to 70 can increase your pension benefit, the effects of early retirement on later spouse benefits, and when WEP does and does not apply. Larry Kotlikoff is a professor of economics at Boston University and the founder and president of Economic Security Planning, Inc.

See more Ask Larry the answer here.

Do you have questions about social security that you would like answered? Ask Larry about social security here.


How could an application at 70 increase my pension benefit from social security?

Hi Larry, I’m trying to figure out the best time to claim social security. I have just reached my full retirement age. I am self-employed and enjoy my work. My mom and grandma died at the age of 92, so that’s what I expect my lifetime to be. My original plan was to wait until I was 70 to make demands and work until then.

Then I started thinking what if I work the three years and make demands next year. I think I could more than compensate for the lack of benefit by working and there is no penalty because I have reached full retirement age. It seems like this would be the best plan, but in all my research online, I have not seen anyone mention doing this, so I wonder if there is something I am not considering. Thank you, Pamela

Hi Pamela, The filing option that will ensure you receive your highest possible monthly benefit rate for life is to wait up to 70 years to claim your benefits. Your Social Security pension benefit will increase by at least 8% for each year you wait to start collecting until you reach 70.

Social security pension benefits are based on an average of a person’s highest 35 years of social security covered wage indexed income, so if you continue to work, you could potentially increase your monthly rate even more if you earn more in a year than you did in a year . of your previous highest 35 years. Any such increase will be in addition to the above increase of 8% per. year.

That said, there is no limit to earnings when you reach full retirement age (OFF), so if you think it would be better to start deducting your benefits earlier at a lower monthly rate, you are of course free to do so. that. You may want to consider using my company’s software – Maximize my social security or MaxiFi Planner – to ensure that your household receives the highest lifetime benefits. Social security calculators provided by other companies or non-profit organizations can make appropriate suggestions if they were built with extreme care. Best, Larry


Will my wife’s spouse benefit be reduced if she takes her own benefit early?

Hi Larry, My retired wife is 65 and I’m 66. We’re financially minded. I retire and reach full retirement age, but can have self-employment for at least one more year. If I take my pension benefit at age 70 and my wife takes her relatively low pension benefit now, will her spouse benefits be reduced when she applies for them on her FRA? Will this also affect our family maximum? Thanks, Clark

Hi Clark, Your wife’s possible spousal benefit would not be reduced if she started deducting her retirement benefits now, but she would retain the age reduction that applies to her own benefit even after she becomes eligible for spousal benefits.

Say, for example, that Amy is applying for her benefits this year at age 65. Amy’s pension benefit will be reduced to below her primary insurance amount (PIA) or full retirement age (FRA).

Four years later, when Amy is 68, her husband applies for her retirement benefits. Amy’s unreduced excess spouse rate is calculated by subtracting her PIA from 50% of her husband’s PIA. Amy’s spousal benefit would not be reduced for age as she had already reached FROM when she was eligible for spousal benefits.

But her non-reduced excess spouse benefit amount would then be added to Amy’s own reduced pension benefit rate, giving her a total benefit below what it would have been if she had waited until FRA to apply for both. Best, Larry


Sounds like I’m safe from a WEP reduction?

Hi Larry, My understanding of the Windfall Elimination provision is that it causes a person’s social security benefit rate to be calculated using a less generous calculation method if the person also receives a pension based on their income that was exempt from social security taxes.

I receive a small pension from about 10 years of work in a municipal agency. While I was there, they withheld OASDI from every payslip that I understood was for social security, and all my earnings from that job appear in my social security earnings. Does it sound like I’m safe from the WEP reduction when I apply for my Social Security pension? Thanks, Stuart

Hi Stuart, yes. Windfall Elimination Provision (WEP) only applies if a person receives a pension based on their earnings that was not subject to social security taxes. If you paid social security taxes on your earnings on which your municipal pension is based, that pension would not result in any reduction in your social benefits. OASDI is an abbreviation for Old Age, Survivors and Disability Insurance, which is the formal name for the Social Security program. Best, Larry


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