Ask Larry: What Effect Will Suspending My Social Security Benefit And Working More Have?

Today’s Social Security column addresses questions about how suspending a benefit taken at 62 while working more might have on benefit rates, filing for spousal benefits after taking retirement benefits and whether to take benefits early when children are part of the equation. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc.

See more Ask Larry answers here.

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


What Effect Will Suspending My Social Security Benefit And Working More Have?

Hi Larry, I started taking my Social Security retirement benefit at 62 and am now 65 1/2. I continued to work and earn the approved amount set by the SSA during this time. I would like to suspend my benefit and start earning more money during this economic downturn to make ends meet.

What impact does this have on my benefits and am I required to payback what I have received from 62 to my current age or from January until I request the suspension? Thanks, Pat

Hi Pat, You aren’t able to voluntarily suspend your benefits prior to the month that you reach your full retirement age (FRA). Unless you were born on January 1, it sounds like your FRA is likely be May 2022. If you were born on January 1 1956, though, your FRA would be February 2022. In order to voluntarily suspend your benefits, you’ll need to contact Social Security no later than the month that you want the benefit suspension to begin.

Since you won’t reach your FRA before the end of 2021, Social Security would need to withhold $1 of your 2021 benefits for each $2 that you earn in excess of $18,960 this year. You wouldn’t have to pay back any of the benefits you were paid for years prior to 2021 no matter how much you earn this year or in future years.

MORE FOR YOU

In 2022, the exempt amount of earnings will be higher for you. The amount for people turning FRA in 2022 will be $51,960 without causing a loss of any benefits. And only earnings in the months prior to the month you reach FRA count toward the limit. There’s no limit on how much you can earn starting with the month you reach FRA.

So unless there’s a huge jump in your earnings, you’ll probably be eligible to be paid your benefits for all months in 2022, although you could voluntarily suspend your benefits starting with the month you reach FRA.

If you voluntarily suspend your benefits between FRA and age 70, your benefit rate would increase by 2/3rds of 1% for each month that you don’t collect your benefits. Your earnings could also cause your benefit rate to increase, but only if your earnings are high enough.

Social Security retirement benefits are based on an average of a person’s highest 35 years of Social Security covered wage-indexed earnings, so additional years of earnings only increase a person’s benefit rate if they’re higher after inflation indexing than one or more of the 35 years currently being used to calculate the person’s benefit rate. You may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to fully analyze your options so you can make informed decisions about your best strategy for maximizing your benefits and avoid unknowingly leaving money on the table. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry


Can I Refile For Spousal Benefits?

Hi Larry, I am 67 and filed for my own Social Security retirement benefit at 62. My husband is three years younger than me and has just filed for his Social Security retirement benefit at 64. We were both born after 1954.

His benefit amount is about $1,750 and mine is about $1,000, can I refile for spousal benefits? Would I make any difference in the amount I receive? Thanks, Sally

Hi Sally, Once you start drawing your own Social Security retirement benefits, those benefits continue for life. You could apply for an excess spousal benefit to be paid in addition to your own benefit, but it doesn’t sound like you’d be eligible.

The only way that you’d qualify for an excess spousal benefit would be if your primary insurance amount (PIA) was less than half as much as your husband’s PIA, and based on the benefit rates listed in your question, it apparently isn’t. A person’s PIA is equal to their Social Security retirement benefit rate if they start drawing their benefits at full retirement age (FRA). Best, Larry


Should I Wait Or Take Benefits Now?

Hi Larry, I’m 62 now and my birthday is March. My wife and I have two kids. One will reach 16 in February 2022 other just turned 15 last summer. My job for the last seven years has been in real estate, we have an S corporation. As of 2020 I’m now paid a modest paycheck with a W-2.

My wife is a licensed realtor and also has a fulltime job that pays well. I’m thinking about retiring or throttling back my real estate business. Should I wait or take Social Security benefits now while my kids are under 18. My benefits if I take now would be about $1,750 and $2,323 at my FRA. Thanks, Art

Hi Art, Taking your benefits at age 62 could allow your children to collect child benefits, but the downside is that your monthly benefit rate would then be reduced for as long as you live.

And if your benefit rate would be higher than your wife’s benefit rate, starting your benefits early would lower the benefit rate that she could potentially be paid as a survivor. Best, Larry


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