Social Security rules are complicated and change often. For the most recent “Ask Larry” columns, check out maximizemysocialsecurity. com/ask-larry.
Prior to responding to this week’s queries, let me draw your attention to a fantastic new piece that top personal finance writer in the country Phil Moeller is currently penning on Medicare for Paul Solman’s Making $ense page. Phil, Paul, and I are co-authors of a book that will be published in February by Simon & Schuster titled “Get What’s Yours — The Secrets to Maxing Out Your Social Security Benefits.”
But when it comes to retirement, Social Security is just one of the major concerns you should think about. Medicare is another biggie. Phil will assist you in selecting which Part D prescription drug insurer to use, when to enroll for specific Medicare benefits, the cost to some individuals of delaying Medicare Part B enrollment, the absurd way that Part B premiums increase with income, the new Medicare tax on the asset incomes of individuals with high adjusted gross incomes, and more.
Question: My husband passed away unexpectedly at 58. He ran our little dental laboratory at the time since I was unable to I took the survivors benefit at age 59 and a half because I didn’t have much money of my own and knew it would be cut. I would like to know what happens to my Social Security benefit, which would be $580 a month based on my earnings. My survivor benefit is nearly three times this amount; do I still receive it?
Larry Kotlikoff: I’m sorry to hear about your husband. I regret to inform you that Social Security will only pay the greater of your widow’s benefit or your own retirement benefit, so you are not eligible to receive any additional benefits based on your own work history. Furthermore, it appears that your retirement benefit will still be less than your widow’s benefit even if you wait until you are 70 to start receiving it, even though it will then be at its maximum.
The Social Security Administration (SSA) provides a safety net for individuals who are unable to work due to disability or have reached retirement age. However, there are certain circumstances under which the SSA may suspend or stop your benefits. This guide will delve into the intricacies of Social Security benefit suspension, outlining the potential reasons and procedures involved.
Voluntary Suspension of Retirement Benefits: A Strategic Choice
If you have reached full retirement age but are not yet 70, you have the option to voluntarily suspend your Social Security retirement benefits. This strategic move can result in a higher benefit payment in the future due to the accumulation of delayed retirement credits. However, it’s crucial to consider the implications before making this decision.
Benefits of Voluntary Suspension:
- Increased Benefit Payments: For each month your benefits are suspended, you earn delayed retirement credits, which translate into a higher monthly benefit payment when you resume receiving them.
- Tax Advantages: If you are still working and have a lower income, suspending your benefits can reduce your taxable income, potentially lowering your tax liability.
Drawbacks of Voluntary Suspension:
- Loss of Current Income: While your benefits are suspended, you will not receive any monthly payments from Social Security. This could impact your current financial situation.
- Impact on Dependents: If you have dependents who receive benefits based on your record, their benefits will also be suspended during this period.
- Medicare Part B Premiums: If you are enrolled in Medicare Part B, you will be responsible for paying the premiums directly, as they cannot be deducted from your suspended benefits.
Procedure for Voluntary Suspension:
- You can request voluntary suspension orally or in writing.
- Your benefits will be suspended beginning the month after you make the request.
- You can change your mind and reinstate your benefits at any time.
Involuntary Benefit Suspension: Reasons and Implications
In certain situations, the SSA may involuntarily suspend your benefits, either temporarily or permanently.
Reasons for Involuntary Suspension:
- Medical Improvement: If the SSA determines that your medical condition has improved to the point where you are no longer considered disabled, your disability benefits may be suspended.
- Substantial Earnings: If you return to work and your earnings exceed the substantial gainful activity (SGA) limit, your disability benefits may be suspended. The SGA limit for 2024 is $1,550 per month for non-blind individuals and $2,590 per month for blind individuals.
- Failure to Cooperate: If you fail to cooperate with the SSA’s requests for information or medical examinations, your benefits may be suspended.
- Fraudulent Activity: If you are found to have engaged in fraudulent activity related to your Social Security benefits, your benefits may be suspended or terminated.
Implications of Involuntary Suspension:
- Loss of Income: You will stop receiving monthly benefit payments during the suspension period.
- Loss of Medicare Coverage: If your disability benefits are suspended, you may also lose your Medicare coverage.
- Repayment of Overpayments: If the SSA determines that you were overpaid benefits, you may be required to repay the overpayment amount.
Procedures for Involuntary Suspension:
- The SSA will notify you in writing if your benefits are being suspended.
- You have the right to appeal the suspension decision.
- If your appeal is denied, you may be able to request a hearing before an administrative law judge.
Additional Considerations: Reporting Changes and Work Incentives
It’s crucial to keep the SSA informed of any changes that could affect your eligibility for benefits. This includes reporting improvements in your medical condition, changes in your income, and any changes in your living situation.
The SSA offers work incentives to help individuals with disabilities return to work without jeopardizing their benefits. These incentives include a trial work period, extended eligibility for Medicare, and plans to achieve self-support (PASS).
Navigating Social Security benefits can be complex. By understanding the circumstances under which your benefits may be suspended, you can make informed decisions and protect your rights. Remember, it’s essential to report any changes that could affect your eligibility and to cooperate with the SSA’s requests for information. If you have any questions or concerns, don’t hesitate to contact the SSA or seek professional guidance.
GOT SOCIAL SECURITY QUESTIONS?
In your situation, it would have been best to begin your retirement benefit at age 62 and your widow’s benefit at full retirement age, when it would have been as large as possible, assuming you could have survived on just your own retirement benefit. You would have received the greater of your retirement benefit and, well, nothing since you would not have taken out your widow’s benefit between the ages of 62 and full retirement age.
Wish I had better news, but Social Security forces people to pay FICA taxes for their entire working lives and often, as in your case, gives them nothing in exchange for all those contributions because of their receipt of a larger ancillary benefit. This is like a company telling a widow that it canceled her pension because her husband died and left her life insurance.
Since 2007, I have been receiving Social Security Disability Insurance (SSDI) at the age of fifty-five. Since then, it has been my only source of income. When I left my job in the first half of 2001, I was paid $92,600 a year. When does my SSDI benefit transition to Social Security, and how can I find out how much my Social Security benefit will be when I get there?
The amount that the Social Security website’s benefits calculator provided me with was less than my current SSDI benefit. I assume I will live to be 90 years old, which is the age at which both of my parents passed away. How would I calculate the age at which I would maximize my lifetime benefits from Social Security?
Larry Kotlikoff: Unless you withdraw it, your disability benefit will automatically convert to your retirement benefit at your full retirement age of 66 and a half months. Your benefit amount won’t change. The benefit’s name is the only thing that will alter.
Keep in mind that “withdrawing” your benefit does not mean that it will be suspended. As I’ve mentioned, if you are or were married, you might want to take your retirement benefit early when you reach full retirement age in order to receive benefits based on the work history of a living, deceased, or ex-spouse, such as full spousal, full widower’s, or full divorced spousal.
If collecting on an ex, you need to have been married at least 10 years. If there is a spouse or ex-spouse on which you can collect and you do withdraw, you can restart your own retirement benefit at a roughly 25 percent larger value at age 70. If you restart it before age 70, it will receive fewer delayed retirement credits, but it will still be larger than it was when you reached full retirement age. Delayed retirement credits are allocated on a monthly basis, but add up to an 8 percent increase per year.
You can also accrue delayed retirement credits if you suspend rather than withdraw your retirement benefit when you reach full retirement age. These credits will take effect when you resume your benefit. The ability to request a lump sum repayment of all suspended benefits in the event of an emergency is one benefit of suspending rather than withdrawing your retirement benefits. Giving up your future delayed retirement credits will be necessary to accomplish this, though. However, you will not be able to receive the previously mentioned full spousal or widower benefits based on your current or former spouse(s) if you suspend rather than withdraw your retirement benefit.
Douglas, Ashtaula, Ohio: I take it that there are no upper limits to what I can make working after the age of 70? That is, that my benefits won’t be reduced if I wait to claim Social Security benefits?
Larry Kotlikoff: Not quite correct. Social Security’s earnings test ends the nanosecond you reach your full retirement age. That’s age 66 for those born from 1943 through 1954.
Contrary to popular belief, the earnings test may not always be a problem for people who are not yet at full retirement age. The reason is because Social Security refers to the amount lost as a result of the earnings test as “the adjustment of the reduction factor,” or ARF, when determining retirement, spousal, or widow(er) benefits. Social Security increases your benefit because of the ARF, making up for any benefits you lost because you earned too much money in the past.
But, the ARF won’t help you if you were receiving benefit X and lost some of it because of the earnings test and then started receiving benefit Y, which is greater than X, after you reached full retirement age. The rationale is that Social Security only covers the higher benefit, or a benefit very nearly so, out of the two. Since Y isn’t “ARF’d” in this instance, it makes no difference that benefit X has been restored to its full value because you won’t be receiving X. Instead, you’ll be collecting Y.
Question: I am 63 and working, widowed 20 years ago. My husband was retired and collecting Social Security. I did receive survivor benefits for our young child, but because I was making too much money, I was unable to continue receiving them for myself.
Given that my current salary is $100,000, is it wise for me to file now as a widow against my deceased husband’s account and then switch to my own retiree benefits when I retire in two or three years? Thank you.
Larry Kotlikoff: Exactly what’s best can be determined with very accurate commercial software, but my intuition is that you should apply for your widow’s benefit as soon as you retire and then for your own retirement benefit at the age of 70. You ought to apply for your widows benefit right away if your income drops to the point where the earnings test won’t cause you to lose everything.
Can You Stop and Restart Social Security Benefits?
FAQ
Why would Social Security stop payments?
Can Social Security payments be suspended?
Can SSI stop payment without notice?
What happens if Social Security stops?