Ask Larry: ​​​​​​Will My Earnings This Year Increase My Retirement Benefits?

Ask Larry: ​​​​​​Will My Earnings This Year Increase My Retirement Benefits?

Social Security may be one of your largest assets. What and when you collect will make a huge difference to your lifetime retirement benefits.

Today’s post examines whether continued income might increase benefit amounts, whether you can voluntarily pay Social Security taxes, the ability to sequence retirement and widow(er)’s benefits and whether pension survivor benefits can affect benefits. Larry Kotlikoff is the founder and president of Economic Security Planning, a company that markets Maximize My Social Security, a Social Security benefits calculator referred to in this post.

Will My Earnings This Year Increase My Retirement Benefit?​​

Hi Larry, I will turn 62 in September. My husband is 67 and took his Social Security retirement benefit at 64. Since I will make an estimated $50,000 this year, which is about $40,000 higher than some of my earlier years of working, could this increase the amount of my benefits? And should I wait till January to file? Could I claim a spousal benefit and delay my own retirement benefit in order to get a higher amount? Thanks, Laura

Hi Laura, It sounds like your earnings this year will likely cause your retirement benefit rate to increase, but your current year earnings can’t be used in the calculation of your benefit rate until next January. When to start drawing benefits is a personal decision that depends on many factors. But, if you will earn $50,000 this year and more than $1,410 all months, then you probably couldn’t draw benefits before your full retirement age (FRA) due to Social Security’s earnings test. You couldn’t file for spousal benefits at any time without also being deemed to file for your own retirement benefits. You might want to use an expert Social Security benefits calculator as described in other answers to compare all of your options and determine your best filing strategy. Best, Larry

Can I Voluntarily Pay Social Security Taxes On My Overseas Wages?​

Hi Larry, I have paid in to Social Security for 15 years then I took a new job overseas. My new employer is 100 percent foreign company I file my taxes each year as I should but I notice I’m not paying into my Social Security as my employer does not provide any option to do so. Do I have the option to pay SSA taxes voluntarily and if so, what’s the minimum to pay to keep the window open for me to be eligible for Social Security benefits? Thanks, Will

Hi Will, No, you can’t voluntarily pay Social Security taxes on wages that you receive from an overseas employer. However, if you were self-employed as an independent contractor and subject to US taxes, then you would likely be required to pay Social Security self-employment taxes.

If you’ve paid into Social Security for 15 years, then you likely already have the 40 quarters of coverage needed to qualify for retirement benefits when you are at least age 62. But in order to be insured for Social Security disability benefits (SSDI), you must normally have at least 20 quarters of coverage within the 40 quarter period leading up to your disability onset. In other words, you would likely be unable to qualify for SSDI after you’ve stopped paying into Social Security for more than 5 years. There’s no way to remain insured for SSDI other than by paying Social Security taxes based on covered wages or self-employment earnings. Best, Larry

Is What I Was Told True?​​

Hi Larry, My husband passed away recently. He was 65 and had collected one Social Security retirement benefit installment. I just turned 62 and I was recently told that as a widow, I could move to a different level than what I would normally get if I retired at 62 being married. Is that true? My retirement benefit is higher than my husband’s. Thanks, Bette

Hi Bette, I’m sorry for your loss. If your own Social Security retirement benefit rate is higher than your potential widow’s rate, then your best strategy would likely be to file for reduced widow’s benefits now, and then switch to your own retirement benefits at age 70. However, if you are still working and earning more than the current annual exempt amount, the Social Security earnings test could affect when you can start drawing benefits. Best, Larry

Will I Be Able To Receive A Widow’s Benefit?​​

Hi Larry, My husband is 72 and has been drawing his retirement benefit since he was 62. I am a teacher and will retire next year at 66. If he passes away will I be able to draw any widow’s benefit? Thanks, Cindy

Hi Cindy, That depends. If you will be receiving a teacher’s pension based on earnings that were exempt from Social Security taxes, then any widow’s benefits for which you would otherwise be eligible would be subject to an offset of 2/3rds of the amount of your teacher’s pension. In that case, in other words, you would only receive widow’s benefits if your widow’s rate exceeds 2/3rds of the amount of your teacher’s pension. This is due to Social Security’s Government Pension Offset (GPO) provision, which also has the same effect on spousal benefits. Best, Larry

Can You Shed Any Light On The WEP And GPO Provisions?​​

Hi Larry, Will my Social Security benefits be affected because I receive a pension as a widow based on my husband’s work. As I get ready to apply, reading of the GOP and WEP has me extremely nervous. Can you shed light on this confusing topic? Thanks, Vanessa

Hi Vanessa, If the only pension other than Social Security that you receive is a survivor pension based on your husband’s work, it won’t affect any type of Social Security benefits for which you may qualify. An expert Social Security benefits calculator, such as my company’s software or another highly precise program that’s also fully programmed to handle cases involving both WEP and/or GPO can help you determine your best strategy with regard to Social Security benefits. Best, Larry

Source: Forbes
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