Ask Larry: Is It True That Benefits Lost To Social Security’s Earnings Test Are Returned At FRA?

Today’s column addresses questions about whether benefits lost to the earnings test can ever be recovered, how soon spousal benefits are available after marriage, the effect of birth date on spousal benefits before retirement benefits and being eligible for more than one benefit at a time. 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.


Is It True That Benefits Lost To Social Security’s Earnings Test Are Returned At FRA?

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Hi Larry, I was told if you earn over the allowed amount there is a penalty of $1 for every $2 over the allowed amount. But then I was told that penalty amount collected is returned once you reach your full retirement age. This doesn’t seem correct. Is it true? Thanks, Joshua

Hi Joshua, Amounts withheld from a person’s benefits as a result of Social Security’s earnings test are not returned to the person when they reach full retirement age (FRA), at least in a direct manner.

What happens instead is that when the person reaches FRA, their Social Security retirement benefit rate, which would have beed reduced for filing early, can be adjusted to compensate them for the fact that they weren’t paid some of their benefits prior to FRA. That could permit the person to recoup some, all, or more than all of the benefits they lost to the earnings test in the form of a higher monthly benefit rate.

For example, say that Jane files for reduced Social Security retirement benefits three years prior to FRA, so her benefit rate is reduced for age by 20% as a result. Let’s say Jane’s FRA rate would have been $1,000, but that amount is reduced to $800 in return for starting her benefits three years early. Then let’s assume that because of Jane’s earnings Social Security ends up withholding her benefits for half of that three year period. In that case, effective the month that Jane reaches FRA, her benefit rate would be adjusted to $900 to compensate her for the fact that she was only paid for half of the three year period that she was expected to collect benefits prior to FRA. In other words, instead of having her benefit rate reduced by 20%, starting with FRA Jane’s benefit rate would only be reduced by 10%.

Doing the math in the above example, we find that $14,400 (i.e. $800 x 18 months) of Jane’s benefits were withheld due to the earnings test. But because of that withholding, her benefit rate is increased by $100 when she reaches FRA. Thus, if Jane lives for at least 12 years after reaching FRA she’ll have recouped all of the benefits she lost to the earnings test in the form of her higher monthly benefit rate (i.e. $14,400 / $100 = 144 months, or 12 years).

My company’s software — Maximize My Social Security or MaxiFi Planner — fully accounts for the earnings test. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry


How Long Must You Be Married To Be Eligible For Spousal Benefits?

Hi Larry, How long do you have to be married to be eligible for spousal benefits? We were recently married and both have income we paid SSA taxes on. We’re trying to figure out how best to file once we can file on each others’ records. Thanks, Gwen

Hi Gwen, You must normally be married for at least a year before you can be eligible for spousal benefits. However, there are exceptions that can permit a spouse to qualify for spousal benefits sooner than their first anniversary.

In order for you to be eligible for spousal benefits though, your spouse would have to be drawing either Social Security disability (SSDI) benefits or Social Security retirement benefits. Your spouse must have at least 40 quarters of Social Security credits in order to potentially be eligible for Social Security retirement benefits. And the same is true for you in order for him to file for spousal benefits on your record.

If you were born after 1/1/1954, you couldn’t file for spousal benefits without also filing for your own Social Security retirement benefits at the same time. In that case you could only be paid essentially the higher of your own retirement benefit rate or your spousal rate, and your rate would be reduced for age if you start drawing prior to full retirement age (FRA). And again, this applies to him filing for spousal benefits on your record too of course. Best, Larry


Why Can’t I Receive My Husband’s Benefit Along With My Disability?

Hi Larry, I am 65, almost 66. My husband passed away in 2015 at 65. I was getting $671 a month in widow benefits until October of last year. I have been on disability since then. I was told that I can’t get widow’s benefits and disability together. I had to pick one or the other. I don’t understand why I can’t receive my widow’s benefit along with my disability. They’re two different things. It’s confusing to me because others have told me that I should be able to get the survivors benefit as well. Thanks, Stephanie

Hi Stephanie, I’m sorry for your loss.

No one is allowed to collect more than one full Social Security benefit at the same time. That’s simply how the Social Security law was set up by congress. If a person qualifies for more than one type of Social Security benefit simultaneously, they can only be paid the higher of the two benefit rates. However, if a person is drawing their own retirement benefits and they’re also eligible for a higher auxiliary, e.g. spousal, or survivor benefit, Social Security pays the person’s own benefit rate first plus a partial, or excess, auxiliary or survivor benefit. The two benefit amounts would just add up to the higher auxiliary or survivor rate though.

Apparently, in your case your Social Security disability (SSDI) benefit rate is higher than your widow’s rate, which would explain why your widow’s benefits stopped when your SSDI began. If your widow’s rate would have been higher than your SSDI rate, Social Security would have paid you your own SSDI benefit plus a partial widow’s benefit equal to the difference in the two rates. In either case, though, you’d only be able to collect an amount equal to the higher of the two benefit rates. Best, Larry


Can My Husband Apply For Spousal Benefits At FRA And Then Switch To His Own Benefits At Age 70?

Hi Larry, I was born in 6/1954 so have reached FRA. I just applied for my Social Security retirement benefits, to begin in 12/2020. My husband was born on 10/1956 so won’t reach FRA until 66 years and four months His benefits at full retirement age are pretty low so he plans to work as long as he can. Can he apply for spousal benefits at FRA and then switch to his own retirement benefits at age 70? His benefits at 70 will be higher than 50% of my benefit at FRA he’d get as his spousal benefit. Thanks, Brooke

Hi Brooke, He can’t. Only people born prior to 1/2/1954 are permitted to file for spousal benefits without also filing for their own benefits at the same time, also known as filing a restricted application. You and your husband might want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to analyze your options so that you can determine your best strategy for maximizing 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


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