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Ask Larry: Which Month Will Get My Age 70 Social Security Retirement Benefit Rate?

Today’s column addresses questions about exactly when to file to get the full age 70 benefit rate, whether income from the current year is counted when calculating benefit amounts and ways to ensure larger benefits for a surviving spouse. 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.

Which Month Will Get My Age 70 Social Security Retirement Benefit Rate?

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Hi Larry, I will turn 70 in August but I have been claiming a spousal benefit for several years. I want to cancel the spousal and start my own retirement benefit. Assuming I start in August, will I receive credit for August at the new amount, to be paid in September? Or does the new rate start in September, to be paid in October? A person from SSA said the new rate starts in the month after I turn 70. I can’t find a document spelling that out. Thanks, Paul

Hi Paul, If you turn 70 in August, you would receive your full age 70 rate if you claim your benefits in August, and the payment will normally be issued in September. You don’t have to be 70 for the entire month in order to qualify for your full age 70 rate. And you don’t need to cancel your spousal benefits. Those benefits will automatically terminate in the month you claim higher benefits on your own record.

By the way, if your 70th birthday happens to fall on August 1, you’d receive your full age 70 rate if you claim your benefits starting in July. Social Security counts you as reaching your next age on the day before your birthday. Best, Larry

Will Social Security Include My 2020 Salary In My 35 Years Of Highest Earnings?

Hi Larry, I plan on retiring at my FRA in October 2020. I currently am working and will continue to work until October 31, 2020. When I look at my earnings record, it ends in 2019. Will Social Security include my 2020 salary in the 35-years of highest earnings if I retire in October 2020 or should I wait until January 2021 to have the 2020 earnings included? Thanks, Miguel

Hi Miguel, Social Security will give you credit for your 2020 earnings when calculating your Social Security retirement benefit rate regardless of what month and year you choose to claim your benefits. However, your 2020 earnings can’t be used to calculate your benefit rate until your benefit payment for the month of 1/2021. So if you claim benefits in 10/2020, your benefit rate for the first three months of your entitlement will be based on your highest 35 years of wage-indexed earnings through 2019. Then, effective with your benefit payment for 1/2021, your benefit rate can be recomputed to consider your 2020 earnings.

Social Security automatically recomputes benefit rates for people who continue working after they start drawing benefits, but any adjustment due isn’t processed immediately. Those types of adjustments are usually processed in the fall of the year following the year of the earnings, but Social Security does pay any back pay due retroactive to the person’s benefit payment for the month of January. You may be able to speed up the process by submitting proof or your earnings (i.e. W-2 for wages, Schedule SE from your tax return for self-employment) and requesting a manual recomputation.

Before deciding when to start drawing your benefits, you might want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to find what strategy yields the highest lifetime household benefits and to sort through potential alternative strategies as well. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

Do I Have My Planning Correct?

Hi Larry, my wife and I are both retired, with combined pensions netting us $4,300 a month, and a decent IRA that we plan on using only for emergencies and travel in the future. My wife is 61, and I am 60. We want one of us to take Social Security at 62 to supplement our retirement income and allow us more freedom to travel. My family health history would indicate that I will not live to be super old, and I want to make the decision based on ensuring my wife is in the best position should I die first, before FRA even.

Based on our statements from 1/6/2020, I’ll have about $2,200 at 67, $2,750 at 70, and $1,550 at 62, and survivor benefits for her at FRA of $2,250. This is higher than her retirement benefit, but not greatly. My wife will have about $2,025 at FRA, $2,550 at 70, and $1,425 at 62.

If I understand what I have read, my strategy would be to take her early amount next February of $1,417 to beef up our income, and let mine ride until FRA or even 70, should I be so lucky. If I die at say 65, she will be just approaching her FRA and would get my survivor benefits, correct? This would be more than her own even at FRA. If I pass a bit earlier, she will get a reduced portion of my FRA amount but would still be much more than what she is drawing early. Do I have my planning correct, or can you tell me what changes to make. Thanks, Tom

Hi Tom, If your first priority is to assure your wife of the highest possible survivor rate you should wait until age 70 to start drawing your benefits. If you do that and you die after reaching 70, your wife would be eligible for your full age 70 rate as a widow. She wouldn’t get your full rate plus hers, though, just the higher of the two benefit rates.

If you die before reaching full retirement age (FRA) and before starting your benefits, your wife’s unreduced widow’s rate at her FRA or later would be equal to 100% of your primary insurance amount (PIA), which is equal to your FRA rate. If you die before starting your benefits and between FRA and 70, your wife’s unreduced widow’s rate would be equal to the amount you would have received if you’d started drawing your benefits effective with your month of death.

It won’t reduce your wife’s survivor rate if she starts drawing her own retirement benefits at age 62 as long as she doesn’t start drawing her widow’s benefits prior to FRA. However, if she files at age 62 she’ll be stuck with her reduced monthly rate for as long as both of you are living. Best, Larry

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