Ask Larry: Should I Take Social Security Retirement Benefits At FRA To Avoid Future Rate Cuts?

Today’s column addresses questions about possibly filing early to Avoid potential future rate cuts, determining which income years SSA is using to calculate your benefits and potential effects of part time work while receiving disability benefits. 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.

Should I Take Social Security Retirement Benefits At FRA To Avoid Future Rate Cuts?

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Hi Larry, I am 65 and my wife is 64. I am fortunate to have some other sources of income, so I had planned to wait until age 70 to maximize my SS benefit. I am hearing more and more (and more) talk that Social Security may be forced to cut benefits in the future (around 2035?) because of a shortfall in funds because they are starting to pay out more in benefits than they are taking in.

Will I be better off to change my plan and instead take my benefit at FRA (66 and two months) so that I get more years of benefits before a potential benefit cut? Or should I still plan to wait until 70? If you knew or strongly suspected that there was going to be a future reduction in benefits, and I recognize that your crystal ball may not work so well, would that alter today’s advice about waiting to 70 to maximize the benefit over my own or my spouse’s lifetime? Would doing so mean I’d avoid any future cuts?

Incidentally, I read the first edition of Get What’s Yours several years ago. My initial plan was to file and suspend. Then the darn government changed the rules of the game, so I had to get the second edition and restudy everything. Will government change the rules again, so you’ll have to write a third edition? Thanks, Rodney

Hi Rodney, No one knows for sure what will happen in the future, but we don’t recommend altering your filing strategy based on concerns about Social Security’s solvency. Social Security has been in existence for over 80 years now, and congress has always managed to keep the program adequately funded. Furthermore, when congress has made major changes to benefit options in the past, they’ve always grandfathered people like you and your wife who are over age 62 and eligible to claim your benefits. You may be interested in this article that I wrote which addresses your concern.

You and your wife may want to use my company’s software — Maximize My Social Security or MaxiFi Planner — to determine the 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

How Do I Get A Schedule Of The Earnings Years Used To Determine My Social Security?

Hi Larry, How would I get a copy of the schedule of the years Social Security uses — is it 30 years? — to calculate what my benefits will be? Do they just use the highest or do they use the last 30 years, even if I’ve retired six years ago? Thanks, Tom

Hi Tom, It’s actually your highest 35 years of wage-indexed earnings that are used to calculate your benefit rate. If you aren’t yet receiving benefits, you can generally access your earnings history online. You can create an account at the Social Security website and access your information there.

If you’re already receiving benefits or you can’t otherwise access your earnings history online, you may be able to get a printout of your earnings history by contacting Social Security. You could also request a certified record of your yearly earnings by completing and submitting a form SSA-7050, but you must pay a fee for that service. Best, Larry

Will My Part-Time Work Cause My Benefit Rate To Increase?

Hi Larry, I have been on SSI disability since 2011. I am working part time and paying in to Social Security. My full retirement age is 66 and four months. Will my benefit amount increase? If not, do I still have to pay into the fund. Thanks, Fred

Hi Fred, If you’re receiving Supplemental Security Income (SSI), then having earnings and paying into Social Security wouldn’t increase your benefit rate. SSI is are needs based benefits that aren’t calculated based on your contributions. If you are drawing SSI and you become eligible for Social Security benefits, you could basically only receive roughly the higher of the two benefit rates.

On the other hand if what you are receiving is Social Security disability (SSDI) benefits, then additional earnings could potentially increase your rate. The computational formula is complex, though, so I can’t tell you whether or not you might be due an increase. However, if you’re earning a low enough amount to be able to continue receiving SSDI benefits, it’s doubtful that your earnings would be high enough to significantly increase your benefit rate. Whether or not your earnings may result in an increase in your benefit rate, though, you must still pay the required Social Security taxes your covered earnings. Best, Larry

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