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Ask Larry: Will Social Security Let Me Suspend My Benefit If I Return To Work?

Social Security may be one of your largest assets. What and when you collect will make a huge difference to your lifetime benefits.

Today’s column addresses whether it’s possible to suspend a benefit when returning to work, pros and cons of filing a restricted application, how survivor benefits after filing early, house sales effects on disability benefits and not taking a lump sum when reinstating at 70. Larry Kotlikoff is the founder and president of Economic Security Planning, a company that markets Maximize My Social Security, a Social Security benefits calculator referred to in this post.

See more Ask Larry answers here.

Ask Larry about Social Security:

Will Social Security Let Me Suspend My Benefit If I Return To Work?​​

Hi Larry, I won’t reach my FRA for a few years. I’ve stopped working and am considering filing early for my reduced retirement benefit but there’s a decent chance I’ll return to work and earn significant income before my FRA. Assuming I do so, would I be able to suspend my retirement benefits and the benefits my children would be receiving? Thanks, Lloyd

Hi Lloyd, You couldn’t voluntarily suspend your benefits until you reach full retirement age (FRA), but if you return to work and earn more than the Social Security earnings test exempt amount then your benefits would effectively be involuntarily suspended for as long as it takes to withhold $1 of benefits for each $2 or $3 that your earnings exceed the applicable limit for that year. And in that case, Social Security would suspend not only your benefits but also your children’s benefits for as long as it takes to recover the necessary amount. In the year you reach your FRA, Social Security would only count your earnings in the months prior to the month you reach FRA, and the higher exempt amount and the $1 for $3 withholding rate would apply to you that year. In preceding years, the $1 for $2 withholding rate applies. Best, Larry

What Are The Pros And Cons Of Our Strategy?​​

Hi Larry, I turn 66 and my wife turns 65 next month. My FRA retirement benefit is $2,600 and my wife’s FRA retirement benefit is $1,100. Neither of us have applied for any benefits and we’re considering having my wife take her retirement benefit at 65, allowing me to take a spousal benefit simultaneously. I then switch to my retirement benefit at 70, which will be 132% of my FRA retirement benefit. Can you touch on some of the pros, cons and potential alternatives to this strategy? Thanks, Marcos

Hi Marcos, It sounds like the only downside to your proposed strategy would be that your wife would be stuck with a reduced benefit rate for as long as both of you are living. The percentage reduction for filing for retirement benefits 12 months prior to full retirement age (FRA) is roughly 6.67%.

The main upside is that your proposed strategy would allow you to receive a spousal benefit of 50% of your wife’s Primary Insurance Amount (PIA), which is equal to her full retirement age (FRA) retirement benefit amount, for 4 years before switching to your own record at age 70. An expert Social Security benefits calculator as described in other answers can help you explore and compare all of your options and determine which of them the two of you are most comfortable with. Best, Larry

How Would My Wife’s Widow’s Benefits Be Calculated If I Die Before She Reaches FRA?​​

Hi Larry, I’m currently receiving my Social Security retirement benefits. My wife turns 64 in June and we are considering filing for early spousal benefits at 64 and 2 months. I understand how the reduction in spousal benefits works for taking early benefits, and know how to calculate the reduction. It’s my understanding that if I die during the three years before she reaches full retirement age, her widow’s benefit will be permanently reduced, but if I die after she reaches FRA she will receive 100% of my benefit. Is this true, and if so, how do I calculate her benefit during those three years? Thanks, Harry

Hi Harry, Yes, your understanding of widow’s benefits sounds correct. If your wife was born in 1955 then her widow’s benefits would be unreduced as long as she didn’t start receiving them prior to 66. The reduction percentage that would be applied if she started receiving widow’s benefits before then is 0.285 / 72 per month, or 4.75% per year. An expert Social Security benefits calculator, such as my company’s software or other accurate and precise software, can do the calculations you for you. Best, Larry

Will The Sale Of Her House Affect My Niece’s SSDI Benefits?​​

Hi Larry, My niece receives Social Security disability benefits. She just sold a house she inherited from her mom and is moving to another state. She’s worried that she will lose her SSDI payments that she’s been receiving for the past 10 years. She plans to use the proceeds from the sale of the house to help pay rent and support living expenses. Do you know if the SSDI payments will be impacted by this? Thanks, Roger

Hi Roger, The income your niece received from the sale of the house would have no adverse affect on Social Security disability (SSDI) benefits, nor is there any limit on the amount of money that she could have in savings. Best, Larry

Should My Husband Wait Until After His 70th Birthday To Reinstate His Benefits?​​

Hi Larry, Thanks to you and your great book, my husband filed for his retirement benefits at his FRA in 2015 and suspended them immediately, planning to reinstate them at 70. We don’t want Social Security to give us lump sum check for six months when he reinstates, causing us to lose sox months of increases to his retirement benefits. Should he wait until sometime after he’s 70 to reinstate or can he reinstate the month he turns 70? Thanks, Julia

Hi Julia, To start receiving his benefits at 70, he shouldn’t need to do anything. Social Security automatically reinstates suspended benefits at 70 if the person doesn’t reinstate their benefits before then. So, for example, if your husband reaches 70 in November 2019, he should automatically receive his first payment in December 2019. Best, Larry

To learn more about your Social Security options, visit Economic Security Planning, Inc.

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