Ask Larry: Will My Social Security Benefits Really Be The Same If I Start Them In January Or April?

Today’s column addresses questions about when earned delayed retirement credits (DRCs) are applied to retirement benefits, effects on benefits of selling a home, spousal benefits’ effects on retroactive retirement benefits and options after working while on disability. 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.


Will My Social Security Benefits Really Be The Same If I Start Them In January Or April?

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Hi Larry, I am planning to file for Security Security benefits next year. I turned 68 in April. When I checked the SSA website for an estimate of my benefits, there was no difference in the amount it calculated whether I started my claim next January or waited until my birth month. Is that really correct? Thanks, Douglas

Hi Douglas, Initially, yes, but not permanently. If you apply for benefits between full retirement age (FRA) and 70, you initially receive credit for only the delayed retirement credits (DRCs) you earned through December of the year prior to the year you claim benefits. Any remaining DRCs earned in the year that you claim benefits are credited effective with your benefit payment for the following January.

For example, if you filed for benefits in 4/2021 at 68, you would initially be credited with the 21 DRCs you earned through 12/2020. That would result in the same rate you’d get if you filed in 1/2021. However, beginning with your benefit rate for 1/2022, you’d be credited with the additional three DRCs you earned for not drawing benefits for January through March 2021. So from then on your monthly rate would be roughly 2% higher than it would be if you started drawing in 1/2021.

You may want to use my company’s software — Maximize My Social Security or MaxiFi Planner — to explore potential options and find the filing strategy that best fits your needs. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry


Why Would Selling Our Home Cause Our Security Security To Be Reduced By 10%?

Hi Larry, My wife and I sold our home of 32 years with an after tax profit of $400,000, Security Security cited this as the reason to lower our Security Security by 10%. I thought Security Security was based on earned income. why would unearned income reduce Security Security? Thanks, Lonnie

Hi Lonnie, Income from the sale of a home would not affect your Social Security benefit rate, but it could affect the amount of your Medicare premiums. You don’t mention your age or whether or not you’re eligible for Medicare, but that would be my best guess for an explanation of why your payment amount was reduced.

If your Medicare premiums have increased due to a one year increase in your taxable income, your premium rate will likely revert to a lower amount starting next year.

The only other explanation I can think of is that you’re having federal income taxes withheld from your benefits, but having taxes withheld from benefits is voluntary so you would have to have requested that yourself. Best, Larry


If I Elect A Lump Sum For Six Months Of Retroactive Benefits Will It Be Smaller Because I’ve Been Receiving Spousal Benefits?

Hi Larry, I am receiving a spousal benefit based on my wife’s benefit. I turn 70 in December of this year. If I elect to take a lump sum for the previous six months, will it be smaller because I have been receiving the spousal benefit? Thanks, Jeffrey

Hi Jeffrey, Yes, you can’t be paid both your own benefits and your spousal benefits for the same month(s). So if you elect to start your own benefits retroactively, the spousal benefits you’ve already been paid for those months will be deducted from your back pay.

Furthermore, if your own benefit rate is higher than your wife’s rate and if you elect to switch to drawing your own benefits prior to age 70, the lower monthly rate you’ll receive as a result will also apply to your wife’s survivor rate if you die before her. Best, Larry


When My Disability Benefits Stop Can I Switch To Drawing Survivor Or Retirement Benefits?

Hi Larry, I am 63 and has been receiving SSDI. Recently I started working again while on SSDI and plan to work for longer than nine months while receiving about $4,000 each month. I understand that after nine months that Security Security will stop issuing my disability checks. However, according to SSA I would still be considered disabled as SSA has not had a chance to reevaluate if my disability ended. When SSA will stop sending me the disability checks — would I be able to switch to Security Security survivor payments (my wife passed away many years back) or as an alternative to my Security Security retirement benefits? Or would Social Security preclude me from doing so — as I am still considered disabled by SSA even though I am no longer receiving SSDI payments? Thanks, Jill

Hi Jill, If your Social Security disability (SSDI) benefits stop due to your work and earnings, you would be eligible for an extended period of eligibility (EPE) that lasts for at least three years after your trial work period (TWP) ends. During the EPE, your SSDI benefits are suspended but not terminated.

If you file for survivor benefits during your EPE, your survivor rate would be calculated as though your SSDI benefits were still being paid. So the only way that you could collect survivor benefits during your EPE is if your survivor rate exceeds your SSDI rate. And even then, you could only qualify the amount that your survivor rate exceeds your SSDI rate, not the full survivor rate.

However, since you’re at least 62, you could file for reduced Social Security retirement benefits on your own record. The problem with that is that your retirement benefits could be subject to withholding until you reach full retirement age (FRA) based on the Social Security earnings test. In 2020 for example, Social Security would need to withhold $1 of your retirement benefits for each $2 that your earnings exceed $18,240. So whether or not you could actually be paid any Social Security retirement benefits depends on your benefit rate and your yearly earnings. By the way, the earnings test would also apply to any survivor benefits you might qualify for prior to your FRA.

If your benefit rate is high enough to permit payment of at least some Social Security retirement benefits in spite of your earnings, then it would probably be advantageous to claim the retirement benefits. Even though Social Security retirement benefits are reduced for age if you start drawing them prior to FRA, that reduction would be removed when you reach FRA provided that your EPE continues at least until you reach FRA. Best, Larry


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