How Will Not Working Again Affect My Social Security Retirement Benefit Rate?

Today’s Social Security column addresses questions about what effect not working in the years before filing might affect benefit amounts, switching from Social Security disability benefits to retirement benefits and on the process of starting spousal benefits. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc.

See more Ask Larry answers here.

Have Social Security questions of your own you’d like answered? Ask Larry about Social Security here.

How Will Not Working Again Affect My Social Security Retirement Benefit Rate?

Hi Larry, I’m currently 56 and have paid into Social Security every year since I was 18. My position was particularly vulnerable to the effects of the pandemic and was laid off. I may never work again. How will this affect my benefit amount? Thanks, Jeff

Hi Jeff, Your Social Security retirement benefit amount will be based on an average of your highest 35 years of Social Security covered wage-indexed earnings. Not working again wouldn’t lower your benefit rate. You just wouldn’t be able to increase your rate by replacing past lower earnings years with higher future earnings years.

One of the assumptions Social Security bases their estimates on is that you’ll continue earning your last reported income until you file for your benefit. Depending on your earnings history, income in the years before filing might be high enough to knock earlier lower earning years out of your 35 computation years, even after indexing for inflation. Each year that does so is therefore included in the average of your 35 computation years.

If instead of your projected income continuing at your last reported rate you actually have no income in those years, the 35 years would include the earlier lower earning years and so the average would of course be lower.

You can enter various future income estimates into my company’s software — Maximize My Social Security or MaxiFi Planner — to fully analyze your options so you can make informed decisions based on accurate calculations of your benefits based on your estimates of any future income. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

Can I Get Social Security Retirement Benefits In Addition To My Social Security Disability?

Hi Larry, I am 64 and receive Social Security Disability benefits. My brother says I can get Social Security Retirement benefits as well but the only thing I can find is that I can start my Social Security retirement beenfit as early as 62. Disability does not pay enough to buy essentials and I miss out on some food and also some prescriptions even. What are my options? Thanks, Brian

Hi Brian, You can’t collect both Social Security disability (SSDI) benefits and Social Security retirement benefits at the same time. SSDI and retirement benefits are basically the same benefit, but qualifying for SSDI simply allows you to draw your unreduced full retirement age (FRA) benefit rate early. That’s why the benefit rate doesn’t change when a person reaches FRA and their SSDI benefits automatically convert to retirement benefits.

If you apply for Social Security retirement benefits while collecting SSDI, you must choose to receive one or the other benefit. You can’t get both. And if you choose to start drawing retirement benefits at 64 instead of your SSDI, you’ll likely just be taking a roughly 17% cut in your benefit rate.

The only people who receive SSDI who may want to consider voluntarily switching to Social Security retirement benefits prior to FRA are people whose SSDI rate is being offset due to receipt of worker’s compensation or public disability benefits, or people whose eligible family members could receive higher auxiliary benefits if the worker was receiving retirement benefits instead of disability benefits.

Otherwise, their best strategy is virtually always to simply wait until FRA at which time their SSDI benefits automatically convert to Social Security retirement benefits at the same benefit rate. Best, Larry

What Does My Wife Need To Do To Collect Spousal Benefits?

Hi Larry, I will be filing for Social Security at my FRA (66 and 2 months). My wife who is older has been collecting her small retirement benefit for five years. We want her to now collect her spousal benefit which will be higher.

What do we need to do to make this happen? Does she need to file for it or she just get it automatically? Thanks, Jay

Hi Jay, Your wife will have to file an application for spousal benefits in order to claim those benefits. She wouldn’t automatically get spousal benefits when you file for your retirement benefits.

Your wife can file for spousal benefits on the same day that you apply for your retirement benefits or on a later date.

If she applies before you apply, her application would be disallowed since her spousal benefit eligibility is contingent on your entitlement to your retirement benefit benefits. Best, Larry