Today’s Social Security column addresses questions about whether waiting until 70 is always the best strategy, how the Windfall Elimination Provision and Government Retirement Compensation can reduce benefits, and whether survivor benefits or retirement benefits should be taken first. 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.
Do you have questions about social security that you would like to see answered? Ask Larry about Social Security here.
Is delaying my retirement benefits really our best strategy?
Hi Larry, My wife is almost 64 and is four years older than me with an FRA of 66 and six months. My FRA is 67. I would wait until 70 to submit my file. Does that sound like our best strategy? I am the main earner. Thanks, Arnold
Hi Arnold, One possibility would be that your wife is claiming her benefits at full retirement age (FRA), and you are claiming your benefits at age 70. Whether that’s a good plan, however, depends on your and your wife’s comparative advantage rates.
By waiting until age 70 to claim your benefits, you would provide your wife with the highest possible survival rate if you die early. But she couldn’t qualify for partner benefits until you start drawing your benefits. However, your wife will not be eligible for partner benefits at all unless your primary insurance amount (PIA) is more than twice as much as her own PIA.
You and your wife may want to consider using my company’s software – Maximize My Social Security or MaxiFi Planner – to fully analyze your options so you can make informed decisions about your best strategy to maximize your benefits and avoid unconsciously leaves money on the table. Social Security calculators provided by other companies or non-profit organizations can provide good suggestions if built with extreme care. Dear Larry
How Much Will My Wife’s Benefit Rate Drop Because of Her Retirement?
Hi Larry, I am nearing retirement. My wife works for a university where she receives a pension. She has been there for 10 years. I expect to retire at age 65. My wife made enough Social Security credits to get benefits. How much will her fitness decrease with retirement? Thank you Phil
Hi Phil, Assuming your wife’s retirement is based on income that is exempt from Social Security taxes, it sounds like receiving her pension will cause her Social Security retirement benefit to be reduced as a result of the Windfall Elimination Provision (WEP).
The WEP formula is complex, so I can’t tell you how much discount your wife could expect without a lot of additional information.
Any spouse or widower benefits for which she qualifies may be reduced or eliminated by another provision, the Government Pension Offset. My company’s software takes both into account, as do some other calculators. Dear Larry
Are my calculations correct?
Hi Larry, I was married for 15 years before divorcing in 2004. My ex died in 2009 at age 54 without ever applying for benefits. My ex would have reached FRA in February 2022 at 66 and two months. I am retired and am thinking of applying for survivor benefits soon. In February 2022 I will be 61 and five months.
It is my understanding that my survivor benefit will be based on my ex’s full PIA plus any discounted COLAs. I calculate that I will receive 78.2% of my ex’s full PIA plus COLAs in February 2022 and 78.6% of my ex’s full PIA plus COLAs in March 2022. Is this correct? My FRA for survivor benefit is 66 and eight months.
My FRA is 67. I believe my ex’s full PIA and my own full PIA are similar, so I plan to switch to my own benefit at age 70 to earn deferred retirement loans. Does this make sense? Thank you Charlie
Hi Charlie, I calculate that you would receive just under 78% of your ex-husband’s primary insurance amount (PIA) if you start signing at age 61 and five or six months. But regardless of the exact rate, when you retire it sounds like you need to do one of two things. Either a) apply for reduced survivor benefits and then switch to your own record at 70, or b) apply for reduced retirement benefits on your own record at age 62 and then apply for non-reduced survivor benefits at full retirement age (FRA).
If you switch to a higher benefit percentage for your own account at age 70, you will want to start taking your survivor benefit as soon as possible. Even though your monthly benefit would be slightly lower if you started drawing now compared to February or March 2022, by the time you hit 70, you would have received more total benefits by starting drawing now instead of waiting.
Normally, you would want to start drawing the lower benefit and then switch to the higher benefit when it reaches its highest potential rate. My company’s software can help you solve all of this for you so that you can determine the best strategy to maximize your benefits. Other well-developed software can also be useful, as long as it includes the survivor’s FRA and other details. Dear Larry