Ask Mary Jane
Early/Late Retirement Archive

Q. My husband took SS retirement at age 62 but has returned to full-time work due to financial need. He plans on working another 5 years. Meanwhile his Social Security checks have stopped. Would it be advantageous for him to formally withdraw his retirement and pay back what he received--and then file again when he really retires? Or can he just sit in what must be non-pay status for 5 years and then let them know he stops working?

A . As of the month he reaches full retirement age, your husband's Social Security benefit will be automatically recalculated to remove the early retirement reduction for any month an early benefit was not paid. If he waits past full retirement age to resume benefits, his benefit will include delayed retirement credits for any month up to age 70 that a benefit was not paid.

Under newly published regulations, if it is less than one year since your husband's benefits began, he may withdraw his initial benefit application, repay benefits and submit a new application when he again wishes to receive benefits. If it has been more than one year since he began benefits that option is no longer available to him.

Q. I am 65 and went on Medicare only in August. I did not apply for SS. Now SS tells me that I will no longer receive my normal earning statement each year since I am receiving a benefit (Medicare) under the Social Security System. Does these seem fair to all the baby boomers who will apply for Medicare and hold off receiving SS till a later date maybe as late as 70 years old? I even tried to use the new online personal calculator and it told me I was not eligible to use it. Something is wrong with this.

A. Your complaint about the inability to use the new online personal calculator echoes what I have heard from others. Our organization brought this concern to the attention of Congress and the Social Security Administration.

In response, the Social Security Administration corrected the problem. Medicare only beneficiaries now can estimate their benefits on line. Go to http://www.socialsecurity.gov/pubs/10529.html.

Q. At my full retirement age (FRA) can I apply for spouse benefits only? My wife will be 63 next July and can draw $709. Can I apply for 50% of her benefit (I will be 66) and let my account accumulate delayed retirement credits (DRC's) till age 69? Then have her apply for spouse benefits, when I draw on my account? My FRA (66) benefit will be $2,220 without the delayed credits. Would her spouse benefit be reduced even though she is 66 at the time she applies or would she the get the full 50%?

A. At your full retirement age, if your wife has applied for her Social Security benefit you may apply for a spouse benefit and allow your own benefit to continue to increase until age 70.

A wife who begins her own benefit early never receives a full 50 percent of her husband's benefit. When you begin your benefit, what she will receive as a spouse addition to her own benefit is the difference between her unreduced full retirement age benefit and half of your full-retirement-age benefit. Using the numbers you provide as an example and disregarding all interim cost-of-living adjustments or changes in your full benefit amount, when your wife applies for her spouse benefit at her full retirement age, roughly $155 would be added to her reduced personal benefit (i.e. the difference between her unreduced benefit which I estimate as $945 and half of your full benefit - $1,110). Should you predecease your wife, her early retirement would no longer matter. As a widow, her combined personal and widow benefit would be the full amount you would receive if still alive, reduced only if she still were less than full retirement age when her widow benefit began.

Q. Can I file and suspend my benefits at age 66 and draw spouse benefit only while my wife at age 63 collects her spouse benefits (37.5% of my FRA benefit) while I take DRC's to age 70? In other words can both people be drawing spouse benefits on each other at the same time?

A. If either you or your wife applies concurrently for a spouse benefit and a personal benefit, each of you would receive only the higher of the two benefit amounts. A spouse benefit could not be paid while a personal benefit was active but in suspension.

Q. I started taking Social Security in February of this year and now realize it may not have been the best decision.  Once Social Security monthly benefits are started is there any way for me to change my mind and delay receiving benefits and if so what do I need to do to accomplish that?

A. Since it is less than a year since you began benefits, you are entitled to withdraw your original application for benefits. To exercise that option you must repay the benefits received thus far. When you again want to receive benefits, you would submit a new application.

Q. I am currently receiving Social Security widow benefits. I was born in 1943 and am trying to figure out if full retirement age for me is 66 or 65 and 8 months.

A. The increase in age of full retirement is different for a widow than it is for a wage earner. Essentially it lags two years behind. Born in 1943, your full retirement age for widow benefits is 65 years and eight months. Your full retirement age is 66 for a benefit based on your own Social Security earnings record. If you have not previously filed for your own benefit, you can switch to your own benefit whenever your own benefit exceeds the widow benefit you are receiving. Your own benefit will reach its maximum in the month you attain age 70.

Q. I would like to collect Social Security. I'm 63 but I am told I can only earn 13,000/yr. Why do they have the right to tell me how much I can earn? I don't want any more than I am entitled to. The money in there is mine.

A. Social Security is intended to replace earnings lost by retirement, disability or death. The annual Social Security earnings limitation is a rough measure as to whether an applicant for retirement benefits has actually retired. Beginning with the month full retirement age is reached, full benefits can be paid regardless of earnings.

If you expect your annual earnings to exceed the limitation but would like to receive some months of benefits, the best time to apply for benefits to begin is January. Provide the Social Security Administration your best estimate of earnings for the year. The Social Security Administration will determine how many months of benefits are payable based on your earnings estimate. If you continue working, benefits will cease at the beginning of the following year. Based on your new estimate of annual earnings, benefits will resume when they are again payable.

The annual earnings limitation rises each year in keeping with the rise of wages in the economy. The general limitation for 2011 is $14,160. A higher limitation applies the year full retirement age is reached. The higher limitation for 2011 is $37,680. Beginning with the month full retirement age is reached, a benefit is payable regardless of earnings.

Q. My husband was very careful in 2009 to not make a salary over the limit required to continue his Social Security. The company downsized and he was forced to leave. His severance pay boosted his W2 taxable income to 17,000. We recently received a notice that they will withhold his Social Security because he has been overpaid.

A. Your husband needs to obtain a statement from his former employer explaining his reported 2009 earnings. The statement should make it clear how much of the reported earnings was severance pay as opposed to payment for hours worked. Submit the statement to the Social Security Administration and the alleged overpayment will be cancelled.

Severance pay, vacation pay or any other post-employment payments do not count toward the Social Security annual earnings limitation. The only earnings that count against the limitation are earnings from hours worked. If anyone at your local Social Security Administration office tells you otherwise, ask to speak to the office manager and, if necessary, file an appeal. If given that information by phone, insist on speaking to a supervisor.

Severance pay does count as earnings from which Social Security FICA payroll taxes must be withheld. That may be what was meant if someone at the Social Security Administration told your husband that severance pay was considered earnings.

Q. How much can I work and earn while drawing SS benefits?

A. You do not indicate your age or when you expect to begin benefits, but the following information should help. Beginning with the month full retirement age is reached there is no limitation on earnings. Benefits can be paid for each month after full retirement age no matter how much is earned before or after benefits begin.

For persons who have not yet reached full retirement age there are two earnings limitations. The general limitation in 2011 is $14,160 with $1 in benefits withheld for each $2 of excess earnings. A second higher limitation applies in the year full retirement is reached. The higher limitation for 2011 is $37,680. Beginning with the month full retirement age is reached a benefit is payable regardless of earnings.

In the first year of retirement - and in that year alone - a monthly earnings test is used. The monthly test is 1/12th of the annual amount ($1,180 in 2011). After benefits begin, no benefit whatsoever is payable for any month that earnings exceed the monthly limit. The monthly test permits retirement benefits to begin in mid-year without regard to how much is earned before benefits begin. Even in the first year of retirement, the annual test can be used if it permits more months of benefits to be paid. If the annual test is used, all earnings for the year must be considered.

Q. I will be eligible for full SS benefits at age 66. I plan to keep working until age 70. What are the pros and cons of drawing Social Security benefits beginning at age 66, while still working full time, versus waiting until age 70 to begin SS benefits?

A. Personal health and economic issues may suggest the most advantageous time to begin Social Security, but on an actuarial basis, there is no "best" time to begin benefits. Early retirees receive smaller benefits for more years. Late retirees receive higher benefits for fewer years. Considering the time value of money and average life expectancy, a retiree receives roughly the same dollar total whether retirement begins at age 62, age 70 or any month in between.

A major difference in early and late retirement is the benefit paid to a surviving spouse. A special provision of Social Security law protects the widow/er of an age-62 retiree by guaranteeing the survivor the greater of his or her own benefit or a minimum of 82.5 percent of the deceased wage earner's benefit if the survivor is at least 62 when widower benefits begin. Other than this special provision, the widow/er receives the benefit the deceased spouse would receive if still alive.

The low earner spouse in a married couple receives the greater of his or her own benefit or 50 percent of the major wage earner's Primary Insurance Amount (PIA). The PIA is the benefit calculated as of the wage earner's full retirement age. Wage earner benefits and spouse benefits are each reduced if benefits begin before full retirement age. If a spousal benefit is payable, benefits to a couple are maximized if the major wage earner applies for benefits at or after full retirement age whether or not the low earner spouse begins benefits early. There is no advantage to beginning a spouse benefit later than full retirement age as a spouse does not share in delayed retirement credits while both husband and wife are alive.

If your spouse will receive benefits based on your earnings record and you wish to earn delayed retirement credits so as to provide the maximum survivor benefits, the best option is for you to apply for your own benefit at your full retirement age or, if later, when your spouse becomes eligible for a benefit.

You can initiate your benefit any time you wish, but until you reach age 70, you will earn delayed retirement credits for any month a benefit is not paid. A worker whose full retirement age is 66, receives a delayed retirement credit of 2/3 percent per month or 8 percent per year. Any benefit payable to a surviving spouse includes the delayed retirement credits.

Q. I retired in February and received my first Social Security check, $1,102.00, on the second Wednesday of the month for 9 months. I will earn around $10,000 this year. I am receiving around $18,000 a year from my two pensions checks. I am confused with the 50% of every dollar I make after the limit? What dollar amount would that be. If I must return 50% back to Social Security over the limit; will I ever get this 50% back at full retirement age? I have been offered a position making around $18,000 a year, but if I have to give back $4000 to Social Security it would mean I am only making $7.00 a hour? Could I stop my Social Security payments for a quarter of the year? I would greatly appreciate your answers and advice on my situation and what would the smartest approach would be to this situation?

A. Only earnings from employment or self-employment count against the annual Social Security earnings limitation. Pension benefits are not earnings and therefore do not count.

In 2011 the earnings limitation for persons less than full retirement age is $14,160. For every $2 in earnings over the limit, the Social Security Administration must withhold $1 in benefits. If you do not earn over the annual limit, you are entitled to a benefit for every month. If you increase your earnings for the balance of this year, the Social Security Administration will recover any overpayment next year. For example, if you earn $1,000 over the limit this year, $500 would be withheld from next year's benefits. If you wish to avoid any possible overpayment, you may call the Social Security Administration and ask that your benefits be temporarily suspended. You can restart them at any time with another call to Social Security.

Each year's earnings limit is announced in mid-October. Should you think that your earnings for the coming year will exceed that limit, you can provide the Social Security Administration your best estimate of anticipated earnings for the following year. The Social Security Administration will determine how many months of benefits you would still be entitled to receive. Your benefits will cease as of January and begin again in the month they are due. The same procedure would be followed in each succeeding year. Effective with the month you reach full retirement age, your benefit will be recalculated to remove the early retirement reduction for any month an early retirement benefit was not paid. All future checks will increase.

Q. I retired on July 31st of this year after paying into Social Security for 30 years. In the last 25 of those years I paid the maximum amount based on earnings. How will my Social Security benefits be affected by my early retirement? What are my options as to when and how much I may begin collecting? Thank you.

A. The monthly Social Security benefit is determined on an indexed average of the highest 35 years of lifetime earnings. If a wage earner has more than 35 years of earnings, excess years are disregarded. If fewer than 35 years, some zero earning years are included in the calculation.

If you have left the work force, beginning benefits at the earliest eligibility age is a reasonable option. Benefits are reduced for early retirement, but the years of early benefits offset the lifetime reduction. Considering the time value of money, over an average life expectancy, the same total dollars will be received whether benefits begin early or late.

Q. Do you have a formula to help my wife and I determine when is the best time to start collecting SS benefits?

A. Timing of retirement is a very personal decision. What is important is that it is an informed decision. Early retirement reductions and delayed retirement credits are roughly actuarially fair. That is, over an average lifetime the same value in Social Security dollars is paid whether benefits begin at 62, 70 or any month in between. In making your decision as to when to begin a Social Security benefit, you should consider the Social Security dollars you will need in combination with anticipated retirement income from other savings and assets.

Another consideration is whether you are single, married or widowed. The survivor of a married couple receives whichever of their two benefits is the larger (reduced if the survivor benefit begins before full retirement age).

In determining a benefit, Social Security law assumes a 35-year earnings history. When an application for benefits is filed, old earnings are indexed to bring them up to date before the highest 35 years of earnings are selected. Excess lower earning years are disregarded. Zero years are included in the calculation if the wage earner has fewer than 35 years of earnings. Replacing zero years by continuing in the work force can significantly raise a future monthly benefit.

If you do not have a current benefit estimate from the Social Security Administration, you can determine your own benefit on line at the Social Security Administration's new benefit Retirement Estimator web site. The web site is http://www.socialsecurity.gov/estimator/ .

Q. A person who received reduced benefits before his full retirement age could earn up to $14,160 in 2010. Is that figure net income, or adjusted gross income after deducting an IRA contribution or small business expenses?

A. The earnings limitation provision of law requires the Social Security Administration to count as earned income the net income reported on Internal Revenue Form SE and/or total earnings as reported on an employer W-2 report of wages. These earnings are not reduced by contributing to an IRA.

Q. If my wife collects social security at 62, I expect to be already collecting since I'm five years older. As I understand it, since half of my benefit exceeds her benefit, she would collect on her own record plus some additional on my record. Most would be on her record. My question is: If I were to die before her, would her widow's benefit be reduced because she started collecting at 62 even though most of what she receives is on her record? Would the timing of my death matter (i.e., before or after her full retirement age)?

A. When you wife applies for Social Security benefits to begin, her application will cover both her own benefit and any benefit she is due as a spouse. Each benefit would be reduced for months of early retirement.

The age at which your wife begins a widow benefit will determine her widow benefit amount. If your wife is full retirement age or more before being widowed, her widow benefit will rise to the full benefit you would receive if still alive. If she were less than full retirement age, any widow benefit she is due would be reduced for months she was still less than full retirement age. Whenever her widow benefits begin, her early retirement will no longer be a factor.

Q. I'm curious about some information my lady friend received last fall from her local social security office. When her husband died (age 65), she (age 62) was told to take the widow benefit now and when she turned 70 piggyback her own social security payments onto her widow's benefits. I thought it was one or the other, not both.

A. Your friend received excellent counseling from her local Social Security office. A widow (or widower) has the option of choosing which benefit to begin first - her own worker benefit or a survivor benefit based on her deceased husband's earnings. She can even switch from one to the other if it is to her advantage to do so.

Many times it is to a widow's long-term advantage to begin her own reduced retirement benefit at or after age 62 and switch to an unreduced widow benefit at full retirement age. In reverse, if her own benefit will ultimately be larger, she can begin a reduced widow benefit and switch to her own benefit at any time it becomes larger. Her own benefit does not "piggy-back" on her widow check - her own benefit would replace her widow benefit.

A worker's own benefit reaches its maximum at age 70. Delayed retirement credits (the opposite of early retirement reductions) are added to a worker's own benefit for each month benefits are deferred after full retirement age up to age 70.

Q. I am still working full-time. I would like to know how my continued employment will affect my Social Security benefits. By how much will my benefit be increased for each year I work beyond my full retirement age ?A. The delayed retirement credit rate of increase for a worker born in 1940 is 7 percent per year (or 7/12 percent per month). The delayed retirement credit rate reached actuarial fairness at 8 percent for persons born in or after 1943.

When Social Security benefits begin, the Social Security Administration determines a primary benefit based on a worker's 35 highest years of lifetime earnings (after old earnings are indexed to bring them up to date). Next, delayed retirement credits are added for each month after full retirement age a benefit is not paid. Cost-of-living adjustments from age 62 are applied to the enhanced benefit to determine the monthly benefit amount

Q. My husband just passed away at age 64. He had taken early retirement at age 63 but switched to disability because he had retired due to his poor health. I have been told that I am not entitled to any survivor benefits (other than a lump sum of $255) because I am still working and make too much money. Can this be true? I have also been told that upon retirement I will only be entitled to his or my retirement benefit - which ever is greater (mine is).

The information you have been given is correct. A wife or widow is entitled to whichever is greater - her own benefit or her spouse or widow benefit. Both benefits are not payable.

A widow, however, does have the option of deciding which benefit to begin first. You can begin a reduced widow benefit as early as age 60 and then at full retirement age or later switch over to your own benefit. Your own benefit will reach its maximum at age 70. If you are continuing in the work force at earnings that preclude paying benefits, you could begin your widow benefit in the year you reach full retirement age and let your own benefit grow due to delayed retirement credits until you reach 70. That would optimize the benefit you would have for the balance of your life.

Q. I'm 61 years old, retired and in fairly good health. My wife is still working and combined with our income from my savings -- we're really not in need of Social Security money. Given this, I am planning to apply for my benefits only when I turn 65 and 10 months. In other words, I'm opting to NOT take 20% penalty and start the payments at age 62. Am I doing the right thing?? Is there a magical number before I turn 65 & 10 months (e.g., age 64?) when the penalty converges to minimal and I should start getting my Social Security benefits?

A. The Social Security reduction for early retirement is roughly actuarially sound. That is, if beneficiaries live to normal retirement age they receive the same dollar value whether benefits begin at age 62, at full retirement age or any month in between. The age-62 reduction for a worker born in 1942 is about 2 percent. (It rose to 25 percent for persons for whom age 66 is full retirement age and will rise to 30 percent when full retirement increases to age 67.) There is no "magical number" where the reduction becomes minimal. The annual cost-of-living adjustment is added to benefits beginning at age 62 whether or not the wage earner has begun benefits.

Q. Would you be kind enough to tell me the maximum monthly social Security one can receive?

A. Maximum Social Security benefits are paid to a wage earner who earns maximum taxable wages in every year between age 21 and the year of retirement.

The maximum payable to a wage earner retiring in 2011 at age 66 is $2,366 a month. Up to 50 percent additional is payable to a retirement-age dependent spouse. The maximum payable in future years can be expected to rise as maximum taxable wages rise.

Delayed retirement credits can increase benefits payable to wage earners who defer receiving benefits past full retirement age. For example, a wage earner reaching full retirement age 2011 receives an 8 percent benefit increase for each full year benefits are deferred (3/4 percent per month) between full retirement age and age 70.

Q. I am a US resident alien; lived and worked in the US since 1970. Fully current and paid up member of the Social Security club. Do I have to be a US citizen to collect S.S benefits when I retire? The annual information supplied on Social Security benefits gives an amount due at 62 or 66 assuming one works until those ages. Is there a formula or information available that calculates $ benefits beginning at those ages if I retire at an earlier age, e.g. 60, and then wait until 62 or later to start collecting benefits.

A. You do not have to be a U. S. citizen to receive Social Security at retirement age. Non-U. S. citizens, however, who receive their benefits outside the United States are subject to having U. S. income taxes withheld before the benefit is paid.

How much difference leaving the work force early makes depends on the average of prior earnings and whether new earnings would significantly raise the average lifetime earnings on which benefits are based.

The estimate of future benefits on the most recent Social Security Statement you received anticipates your continued participation in the work force until full retirement age. However, you can go on line to determine a revised benefit by entering your projections of your future earnings. The Social Security Administration's new benefit Retirement Estimator web site is http://www.socialsecurity.gov/estimator/ .

Q. I am 75 years old; my wife is 61. I did not start collecting social security until age 70 and receive about $1,650 per month benefit. How much can my wife expect to receive at my death, assuming it happens this year? What would her benefit be at age 65, 66, 67?

A. If Social Security widow benefits begin at or after full retirement age your wife would receive the same benefit you would receive if still alive. Her widow benefit would be reduced for each month of early retirement if widow benefits begin before she reaches full retirement age. The rate of reduction is approximately 4.5 percent per year. The Social Security Administration can provide you a precise amount if you call 1-800-772-1213 or call or visit your local office.

Q. I have been married for 25 years. I am very ill with a terminal condition. My wife is 61 years old. I retired at age 70 and receive a monthly Social Security benefit of $1,850. Should I die, in mid 2011 - a distinct possibility - what monthly benefit would my wife receive for the remainder of this year?

A. Please call the Social Security Administration at 1-800-772-1213 for an estimate of the benefit your wife would receive if she were widowed. They can provide you a precise figure for any month.

Q. Is it correct that if my wife receives Social Security based on her own earnings at 62 she cannot switch to 50% of my benefit when I retire? One more question, please. Is there some kind of a "family maximum" that affects how much retirement benefits a married couple can receive? Thanks again.

A. No, that's not true. Your wife may begin her own reduced Social Security benefit and still qualify for an additional spouse benefit when you begin your benefit. However, a wife who retires early never receives the full 50 percent. Her own early retirement must be taken into consideration. A very simple example may help. Assume your wife's full retirement age benefit is $400 and your full-retirement age benefit is $1,400. If she begins her benefit at age 62, her early retirement reduction will reduce her benefit to approximately $300. Assuming she is full retirement age when you retire, her $300 monthly payment will increase by $300 - the difference between her full benefit ($400) and half of your full benefit ($700). Her new monthly payment would be $600.

The family maximum does not affect the amount of benefits that can be paid to a married couple when both have been in the work force. Each receives his or her own benefit. There is a family maximum on the amount of benefits that can be paid on a single earnings record. For example, the maximum would be reached if a deceased wage earner left a widow and two dependent children.

Q. When I receive my annual Social Security Statement showing the benefit I am eligible for at various ages, does this amount include my wife's spousal benefit? If not, how can I determine what it is? And what impact does her age have on the benefit? Since she is 3 years younger than me, I'm assuming her spousal benefit will not begin until she reaches eligibility age.

A. A maximum Social Security spouse benefit is 50 percent of your full-retirement-age benefit. The extra 50 percent is not included in the benefit estimate shown on your Social Security Statement. The spouse benefit is paid in addition to the wage earner's benefit.

A wife is eligible for a spouse benefit as early as age 62, but if the benefit begins before her full retirement age, it must be reduced for months of early retirement. If your wife's full retirement age is 66, her spouse benefit at age 62 would be 35 percent of your full benefit. Regardless of the age at which she begins a spouse benefit, if she is full retirement age or more before being widowed, your wife's monthly benefit would rise to the full benefit you would receive if still alive.

Q. I delayed applying for my Social Security retirement until I was 68. My wife draws on the basis of my record, but she gets quite a bit less than 50% of my benefit. Apparently her payments are 50% of what I would have received if I had retired at 65. Is this the current policy? I am also penalized under Medicare Part B by paying $20 per month more in premiums than I would have paid had I applied for Medicare at 65 instead of 68. This doesn't seem right to me. Comments?

A. You should not be paying a Medicare Part B premium penalty if you had employer-provided health insurance from age 65 until you retired from the workforce. The law grants an exemption from the penalty for any month an over-age-65 worker is covered by his current employer's health insurance plan or by his spouse's current employer's health insurance plan. If you are being erroneously penalized, obtain a statement from your former employer or from the former employer's insurance company certifying that you were insured by your employer's plan for months after age 65. Present that statement to your local Social Security office with a request for premium relief. Future premiums will be at the lower rate and all excess premiums paid to date will be refunded.

The benefit your wife is receiving is undoubtedly correct. Whether a wage earner retires early or late, a spouse benefit is based on the benefit payable at full retirement age. A widow benefits from delayed retirement credits even though a wife does not. If your wife is full retirement age or more before being widowed, her widow benefit would be the full benefit you would receive if still alive.

Since the repeal of the annual earnings limitation, a wage earner who plans to defer benefits in order to earn delayed retirement credits can apply for benefits at full retirement age (or as soon as his wife is old enough to receive benefits).

When the wife's benefit is in place, the wage earner can request that his own benefit be withheld until age 70 or whenever he chooses to have his benefit begin. The wage earner earns delayed retirement credits for any month from full retirement age to the month age 70 is reached that a benefit is not paid.