Will my Social Security pension rate drop if I stop working? – Community News
Social Security

Will my Social Security pension rate drop if I stop working?

Today’s Social Security column addresses questions about how quitting work before filing might affect benefit rates, when it may be possible to begin spousal benefits on a spouse’s record and gain independent entitlement to divorced spousal benefits before an ex. files starts. 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.


Will my Social Security pension rate drop if I stop working?

Hi Larry, I am 68 and have recently applied for retirement benefits but no decision has been made by SSA yet. Once SSA has determined my benefit amount, will it be determined for the rest of my life?

Can I stop making payments and return to work until age 70 to earn deferred retirement credits? Will my benefit be higher for the rest of my life? Or if I stop working at age 70 with no other income, will it go back to the lower amount it used to be? Thank you, Betty

Hi Betty, Social Security retirement benefits may increase after each year in which a person has Social Security-backed income or earns Deferred Retirement Credits (DRCs).

Such increases are permanent. You cannot earn additional DRCs after you turn 70, and if you stop working at that time, your benefit will not be increased due to additional income. So your benefit amount would then remain the same, unless the cost of living (COLA) increases. Your payout rate wouldn’t drop or revert to a previous payout rate simply because you stop working.

By the way, Social Security retirement benefits are based on an average of a person’s highest 35 years of Social Security wage-indexed earnings, so additional years of earnings will only increase your benefit percentage if the new earnings exceed one or more of the 35 years currently used to calculate your current payout percentage.

If your new earnings are not among your highest 35 earnings years after indexing for inflation, the new earnings are simply disregarded and your payout percentage remains the same. Dear Larry


Can my wife request spousal support from my account even if I am not old enough for benefits?

Hi Larry, My wife turned 62 this year and started taking her Social Security benefits of about $800. I’m 55, so I won’t be receiving benefits for the next seven years. I’m retired, luckily, so I don’t have a salary at the moment. Can and should she apply for spousal maintenance?

My FRA benefit is currently calculated at about $3,000, so even if she only gets the difference between her benefit and 50% of mine, that’s still an extra $700 she could get, if I understand the spousal benefits , which is a big question. Or is she only eligible for spousal maintenance after I have started taking my pension myself? Thank you, Lucas

Hi Lucas, Your wife will not be eligible for partner benefits until you start receiving your benefits, and even then she will only be eligible for partner benefits if your primary insurance amount (PIA) is more than twice as much as her PIA. A person’s PIA is equal to Social Security’s retirement benefit percentage if they begin drawing their benefits at full retirement age (FRA).

Her potential partner benefit would be 50% of your PIA minutes 100% of her PIA, not her reduced retirement benefit at age 62. 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 unknowingly leave money on the table. Social Security calculators provided by other companies or non-profits can make good suggestions if built with extreme care. Dear Larry


Why do I have to wait until my ex retires to qualify for a divorced partner’s benefit?

Hi Larry, I recently started receiving SSDI at the age of 63. An acquaintance told me that I have to wait until my ex, who is 65, retires to receive a divorce payment based on her track record. Is this really true? We were married for over 30 years. Thank you Harvey

Hi Harvey, You don’t have to wait for your ex to receive benefits to potentially qualify for divorce benefits, provided your ex is at least 62 years old and your divorce has been final for at least two years.

However, you are only eligible for a divorce payment if your ex’s primary insurance amount (PIA) is more than twice as much as your own PIA. A person’s PIA is equal to their Social Security retirement benefit percentage if they begin receiving their benefits at full retirement age (FRA), or their full unaffected Social Security benefit percentage (SSDI).

And if you qualify for divorce benefits and if you start drawing it before your FRA, your divorce rate will be lowered for age. So you may want to wait until your own FRA or as close to it as possible before applying for divorce. Dear Larry