Ask Larry: How Will Social Security Calculate My Wife’s Spousal Benefit Rate?

Today’s Social Security column addresses questions about how Social Security spousal benefits are calculated, whether it’s necessary to file in January to get a given year’s COLA and what effects of benefits rates not paying taxes can have. 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.


How Will Social Security Calculate My Wife’s Spousal Benefit Rate?

Hi Larry, My wife of 25 years was born in early 1955. She began drawing benefits at her FRA, $1,150 per month. I was born in late 1955. My estimated benefit at full retirement is $2,920. I do not intend to take my benefits until I am 70. My estimated benefits at 70 are $3,820.

I understand my wife’s spousal benefits would be half of $2,920 or $1,460. How does this work. When I draw at 70, will my wife be entitled to only $1,460 or will she also be able to benefit from the years of COLA’s (presuming COLA’s occur)? Thanks, Jack

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Hi Jack, When you start drawing your benefits, your wife will be eligible for a benefit rate equal to 50% of your primary insurance amount (PIA). A person’s PIA is equal to their Social Security retirement benefit rate if they start drawing their benefits at full retirement age (FRA).

What will actually happen is that your wife will continue to receive her own benefit rate plus an excess spousal benefit equal to the difference in her PIA and 50% of your PIA. And since your wife started collecting her benefits at FRA, her combined amount including her excess spousal benefit will then add up to 50% of your PIA.

Both your PIA and your wife’s PIA will be credited with any cost of living (COLA) increases that occur between now and when you start drawing your benefits, so the bottom line is that your wife’s total monthly benefit rate should add up to 50% of whatever your PIA is when you start drawing. Best, Larry


Is There Any Reason Not To File In January Of A Given Year?

Hi Larry, Is there any reason to not have January as your starting date for starting Social Security benefits? It’s starting in January, would you be entitled to the increase that most people get starting at the beginning of each year? Dean

Hi Dean, There’s nothing inherently wrong with starting benefits effective with January, but in many cases it’s not the best option. If you start your payments in January, you would receive the cost of living allowance (COLA) that Social Security recipients receive in most years, but not because you chose to start your benefits in January.

All Social Security COLA increases that occur after a person reaches 62 are credited to the person’s Social Security retirement benefit rate regardless of whether or not they are drawing their benefits. In other words, you don’t need to start your benefits in January to receive any COLA increases you’re entitled to.

The best month and year to start benefits depends on many different variables, and each person’s set of circumstances are different. You may want to may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to ensure your household receives the highest lifetime benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry


Does Failing To File Taxes Affect My Benefit Amount?

His Larry, If I’m owe back taxes, how will that affect my Social Security benefits or will it? Thanks, Jill

Hi Jill, Failing to file tax returns wouldn’t affect your Social Security benefit rate as long as you still paid Social Security taxes on your earnings. Employers withhold and pay Social Security taxes for covered wage earners, so workers get credit for those earnings even if they don’t pay income taxes.

However, self employed people pay their Social Security taxes in the form of self-employment taxes, which are reported and paid when they file their tax returns. So failing to file tax returns could adversely affect a person’s Social Security retirement or disability benefit rate.

Furthermore, if and when a person claims Social Security benefits the IRS can place a levy on the person’s benefits in order to collect delinquent taxes. Best, Larry


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