Planning for Economic Security, Inc.
Today’s column addresses questions about when earned delayed pension credits (DRCs) are applied to pension benefits, effects on home sale benefits, effects of spousal benefits on retroactive pension benefits and options to work while you are disabled. Larry Kotlikoff is a professor of economics at Boston University and the founder and president of Economic Security Planning, Inc., which maximizes My Social Security and MaxiFi Planner.
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Do you have any questions about social security that you would like answered? Ask Larry here about social security.
Will my social security benefits really be the same when I start them in January or April?
Hi Larry, I plan to apply next year for safety benefits. I turned 68 in April. When I checked the SSA website for an estimate of my benefits, there was no difference in the amount it calculated when I started my claim in early January or waited until my birth month. Is that really correct? Thank you, Douglas
Hi Douglas, First of all, yes, but not permanently. If you apply for benefits between full retirement age (FRA) and 70, you will initially receive credit for only the delayed retirement credit (DRCs) you have earned through December of the year preceding the year you apply for benefits. All remaining DRCs earned in the year you apply for benefits will be effectively credited with your benefit payment for the following January.
For example, if you submitted 68 for benefits in 4/2021, you would initially receive credit for the 21 DRCs you earned through 12/2020. That would result in the same rate you would get if you submitted in 1/2021. Starting with your benefit rate for 1/2022, however, you would be credited with the extra three DRCs you earned for not signing benefits for January through March 2021. So your monthly rate would be about 2% higher as it would be if you started drawing in 1/2021.
You may want to use my company’s software – Maximizing My Social Security as MaxiFi Planner – to explore possible options and find the sign-up strategy that best suits your needs. Social security calculators provided by non-profit companies can provide accurate suggestions if they were built with extreme care. Dear, Larry
Why would selling our home cause our security to be reduced by 10%?
Hi Larry, My wife and I sold our 32 year old home with a profit after tax of $ 400,000, Security Security mentioned this as a reason to reduce our Security Security by 10%. I thought Security Security was based on earned income. why would unearned income reduce Security? Thank you, Lonnie
Hi Lonnie, Income from the sale of a home would not affect your Social Security benefit rate, but it could affect the amount of your Medicare premiums. You do not mention your age or you are eligible for Medicare, but that would be my best judgment for an explanation as to why your payment amount was reduced.
If your Medicare premiums have increased due to an annual increase in your taxable income, your premium rate will likely return to a lower amount beginning next year.
The only other statement I can think of is that you have withheld federal income tax from your benefits, but withholding taxes is voluntary, so you should have applied for it yourself. Dear, Larry
If I choose six months of retroactive benefits, will it be smaller because I have received benefits?
Hi Larry, I’m getting a household benefit based on my wife’s benefit. I’m turning 70 in December of this year. If I take a lump sum for the past six months, will it be smaller because I have received the benefit from the household? Thank you, Jeffrey
Hi Jeffrey, Yes, you can not pay both your own benefits and your benefits for the same household for the same month (s). So if you choose to start with your own benefits retroactively, the benefits of the household that you have already paid for those months will be deducted from your back payment.
Furthermore, if your own benefit rate is higher than your wife’s rate and if you choose to switch to signing your own benefits for 70 years, the lower monthly rate you will receive as a result will also apply to the survival rate of your wife when you die for her. Dear, Larry
If my disability benefits cease, can I switch to survival or retirement benefits?
Hi Larry, I’m 63 and got SSDI. Recently I started working again while I was on SSDI and plan to work for more than nine months while earning about $ 4000 every month. I understand that after nine months that Security will stop issuing my checks for restriction. However, according to SSA, I would still be considered disabled because SSA has no chance to re-evaluate if my disability ended. If SSA will stop sending me about the restriction checks – would I be able to switch to security survival payments (my wife died many years ago) or as an alternative to my retirement benefits from Security Security? Or would Social Security prevent me from doing so – because I’m still considered disabled by SSA, even though I no longer receive SSDI payments? Thank you, Jill
Hi Jill, If you stop using Social Security benefits (SSDI) because of your work and income, you would be eligible for an extended period of eligibility (EPE) that lasts at least three years after your probationary period ( TWP) agrees). During the EPE, your SSDI benefits will be waived, but not terminated.
If you submit for survival benefits during your EPE, your survival rate would be calculated if your SSDI benefits were still paid. That the only way you could reap survival benefits during your EPE is if your survival rate exceeds your SSDI rate. And even then, you could qualify the amount that your survival rate is greater than your SSDI rate, and not the full survival rate.
Since you are at least 62, you can file on your own record for reduced Social Security retirement benefits. The problem with that is that your retirement benefits can be maintained until you reach full retirement age (FRA) based on the Social Security Income Test. In 2020, for example, Social Security would have to deduct $ 1 from your retirement benefits for every $ 2 your income exceeds $ 18,240. So whether you can actually pay all Social Security pension benefits or not depends on your benefit rate and your annual income. In addition, the earning test would also apply to all survivor benefits for which you are eligible for your FRA.
If your benefit rate is high enough to pay off your earnings from at least some Social Security retirement benefits, then it is probably beneficial to claim the retirement benefits. Even though Social Security Retirement Benefits will be reduced for age if you start signing them up prior to FRA, that reduction would be waived when you reach FRA, provided that your EPE continues at least until you reach FRA. Dear, Larry
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