Ask Larry: Will My Social Security Retirement Benefit Be Reduced For Years With Zero Earnings?

Today’s column addresses questions about the effect on benefit rates of years with no income, how early filing reductions are applied for spousal benefits, survivor benefits at 50, timing of spousal benefits and the earnings test. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc, which markets Maximize My Social Security and MaxiFi Planner.

See more Ask Larry answers here.

Have Social Security questions of your own you’d like answered? Ask Larry about Social Security here.

Will My Social Security Retirement Benefit Be Reduced If I Have Years With Zero Earnings?

Hi Larry, I have been in ministry for over 30 years and so of course I was exempt from paying Social Security taxes. Prior to entering the ministry, I worked in jobs where Social Security was paid and have the necessary credits to qualify for benefits. My Social Security statement tells me based on my earnings calculated on my prior work history, my estimated benefit will be $1,200. I am told that even though the estimate shows the $1,200, that all of the years I was exempt will be calculated into the formula as zero earnings and that my benefit will be reduced significantly because of that. Is this the case? Thanks, Fred

Hi Fred, Your Social Security retirement benefit rate is based on an average of your highest 35 years of wage-indexed earnings that were subject to Social Security taxes. If you have fewer than 35 years of Social Security covered earnings, then zero earnings years will be averaged into the calculation of your benefit rate, but that should already be factored into the estimated benefit rate on your Social Security statement. Starting a job where you resume paying Social Security taxes would no doubt increase your benefit rate at least somewhat, assuming that you currently have fewer than 35 covered earnings years. How much of an increase would depend on how much you earn. Best, Larry

How Many Reduction Months Will Be Applied To My Wife’s Spousal Benefits?

Hi Larry, my wife will file for her spousal benefit early. How much will it be reduced? I am 64 and intend to wait until I reach FRA in June 2021 to file for my retirement benefit. My wife is 64 and plans on retiring in June 2020. Her FRA is December 2021.

If she files for her retirement benefit 17 months before FRA, her retirement benefit based on her work record would be of course reduced. But what about her spousal benefit when she files for that once I file for my retirement benefit? Is the reduction based on when she files for her retirement benefit or when she files for her spousal benefit? Thanks, George

Hi George, Any excess spousal benefits your wife qualifies for would be reduced based on the number of months she starts drawing the spousal benefits prior to her full retirement age (FRA). So if she starts drawing spousal benefits six months prior to FRA, her spousal rate would be reduced by 6 x 25/36ths of 1%. That’s true even if she starts drawing reduced Social Security retirement benefits before then and they are also reduced. Best, Larry

What Can I Do To Get My Late Husband’s Benefits?

Hi Larry, I’m really confused and upset with Social Security. I received a letter from Social Security stating that I could draw my widow’s benefit based on my late husband’s record at 50. I filled out all the paperwork and went to a doctor they referred me to. They denied my claim but I think the reason it was denied was because the Social Security office filled a form iWhat can I do to get my widow’s benefits? Thanks, Brenda

Hi Brenda, To qualify for survivor benefits at 50 on the record of your late husband, you’d need to be approved for disabled widow’s benefits or disabled surviving divorced spouse’s benefits. If you applied for those benefits and your claim was disallowed, you can file a request for an appeal. If your claim wasn’t properly filed and as a result you didn’t receive an initial determination, then you may have to start over by filing a new claim. Best, Larry

When And How Should My Wife Claim Benefits?

Hi Larry, I am 64 and my wife is 55. My Social Security retirement benefits will be significantly higher than hers because she was a stay at home mom for many years. Financially, I am able to delay claiming until I’m 70, but when and how should my wife claim? Thanks, Luis

Hi Luis, I can’t make that decision for your wife. She could file for benefits as early as 62, but then her benefit rate would be significantly reduced (i.e. by 30% to 35%) for as long as both of you are living. Even if your wife does start drawing at age 62 though, that would not cause her to receive a reduced survivor rate as long as she’s at least full retirement age (FRA) when and if she later qualifies for widow’s benefits.

Whenever your wife does file for her benefits, she’ll be deemed to be filing for both her own Social Security retirement benefits and for spousal benefits. She’ll then essentially just receive the higher of those two benefits, which will be reduced for age if she starts drawing before FRA.

You and your wife might want to consider using one of my company’s software programs — Maximize My Social Security or MaxiFi Planner — to fully explore and compare all of your various options so that you can determine the strategy that you believe would most likely maximize your benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

Will My Spousal Benefits Be Reduced Because I’m Still Working?

Hi Larry, We are planning for my wife, who was born in 7/2950 and is not working, to apply for her Social Security retirement benefits after her next birthday. I was born in 11/1952 and am planning to file a restricted application for spousal benefits to begin at the same time and continue working with the intent to wait until I turn 70 to apply for my retirement benefits. Will my spousal benefits be reduced because I am still working? My wife is covered by medical coverage through work. Will she be automatically enrolled in Medicare regardless of my coverage? Thanks, Jesse

Hi Jesse, There is no limit on the amount that you can earn and still draw Social Security benefits once you reach full retirement age (FRA). So since you’re already past FRA, your spousal benefits would not be reduced as a result of your earnings. And, yes, your wife will be automatically enrolled in Part A of Medicare when she files for Social Security benefits. No one can be paid Social Security benefits at or after age 65 without also being enrolled in Part A of Medicare. Best, Larry

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