Will Social Security early retirement benefits reduce my spousal rate later?

Today’s Social Security column addresses questions about how taking early retirement benefits may affect later spousal benefits, the effects of the January 2022 COLA on benefits taken later, and whether benefits retirement at age 70 are required. Larry Kotlikoff is a professor of economics at Boston University and founder and president of Economic Security Planning, Inc.

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Will Social Security early retirement benefits reduce my spousal rate later?

Hi Larry, I was born in 1956 and have worked enough years to collect Social Security retirement benefits. My wife was born in 1954 and will wait 70 years to start collecting her retirement benefits. If I start collecting my own benefit now, will that affect the amount of my spousal benefit when I switch, since it will be more than my retirement benefit? Thank you, Daniel

Hi Daniel, Yes. First, you can’t actually switch from your own benefits to spousal-only benefits. You can, however, file a claim for retirement benefits first, and then potentially receive an excess spousal benefit when your spouse starts collecting retirement benefits.

But if you start drawing your pension benefits before full retirement age (FRA), you’ll be stuck with the resulting age reduction in your benefit rate, even if you qualify for a pension afterwards. Excess spousal benefit.

For example, let’s say Amy applies for her retirement benefits this year at age 65. Amy’s Primary Insurance Amount (PIA), or full retirement age rate, would be $800, but Amy’s rate is reduced for age to $728. Several years later, when Amy is on FRA, her husband applies for his retirement benefits. Amy’s husband’s MRP is $2,000, so Amy’s spouse’s unreduced excess rate is calculated by subtracting her MRP by 50% from her husband’s MRP. In Amy’s case, that amounts to $200, or $2,000 / 2 – $800. This amount would then be paid on top of Amy’s reduced rate of $728 to give her a combined rate of $928.

You might want to consider using my company’s software — Maximize my social security Where MaxiFi Planner — to ensure that your household receives the highest lifetime benefits. Social Security calculators provided by other companies or nonprofit organizations may provide appropriate suggestions if constructed with extreme care. Best, Larry

How will the January 2022 cost of living adjustment affect me?

Hello Larry, How will the 2022 Social Security cost of living adjustment affect me? I will be 65 this year and still working and not receiving benefits. Thank you, Susan

Hello Susan, Any Social Security Cost of Living (COLA) increases that occur after a person turns 62 are added to their Social Security retirement benefit rate, which they receive benefits or not. So the short answer is that you will be credited with the COLA increase even if you delayed your benefit payment. Best, Larry

Should I benefit more from my own income when I reach 70?

Hi Larry, I am receiving a widow’s allowance and my retirement benefit at age 70 will be greater than my widow’s benefit. Should I switch to my higher pension at 70? Thank you Kay

Hi Kay, I don’t know about your specific benefit options, but if you are collecting survivor benefits, there is no requirement that you have to apply for your own retirement benefits.

However, if your own Social Security retirement benefit rate will be higher than your survivor rate when you turn 70, I can’t imagine what reason you would have for not claiming the higher benefit. Deferred Retirement Credits (DRCs) cannot accrue from the month you turn 70, so waiting beyond that to claim your own Social Security retirement benefits will not increase your benefit rate. Best, Larry