Will Early Social Security Retirement Benefits Reduce My Spousal Rate Later?

Today’s Social Security column addresses questions about how taking early retirement benefits can affect later spousal benefits, effects of the January 2022 COLA on benefits taken later and whether retirement benefits at 70 are required. 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.

Will Early Social Security Retirement Benefits Reduce My Spousal Rate Later?

Hi Larry, I was born in 1956 and worked enough years to draw some Social Security retirement benefits. My spouse was born in 1954 and will be waiting until 70 to start collecting retirement benefits. If I start to draw my own benefit now, will it affect the amount of my spousal benefit when I switch since that amount will be larger than my retirement benefit? Thanks, Daniel

Hi Daniel, Yes. First, you can’t actually switch from drawing your own benefits to drawing just spousal benefits. You can however file for your retirement benefits first and then potentially qualify for an excess spousal benefit when your spouse starts drawing retirement benefits.

But if you start drawing your retirement benefits before full retirement age (FRA), you’ll be stuck with the resulting age reduction in your benefit rate even if you later qualify for an excess spousal benefit.

For example, say Amy files for her retirement benefits this year at 65. Amy’s primary insurance amount (PIA), or full retirement age rate, would be $800, but Amy’s rate is reduced for age to $728. Several years later when Amy is over FRA, her husband applies for his retirement benefits. Amy’s husband’s PIA is $2,000, so Amy’s unreduced excess spousal rate is calculated by subtracting her PIA from 50% of her husband’s PIA. In Amy’s case, that amounts to $200, i.e. $2000 / 2 – $800. That amount would then be paid in addition to Amy’s own reduced rate of $728 to give her a combined rate of $928.

You may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to ensure your household receives the highest lifetime 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 Will The January 2022 Cost Of Living Adjustment Affect Me?

Hi Larry, How will the 2022 Social Security cost of living adjustment affect me? I will be 65 in this year and I’m still working and not collecting benefits. Thanks, Susan

Hi Susan, All Social Security cost of living (COLA) increases that occur after a person turns 62 are added to a their Social Security retirement benefit rate whether or not they are drawing benefits. So the short answer is that you’ll be credited with the COLA increase even though you delayed drawing your benefits. Best, Larry

Must I Take The Higher Benefit From My Own Earnings When I Reach 70?

Hi Larry, I’m receiving a widow’s benefit and my retirement benefit at 70 will be larger than my widow’s benefit. Do I need to switch to my higher retirement benefit at 70? Thanks, Kay

Hi Kay, I don’t know anything about your specific benefit options but if you’re collecting survivor benefits, there’s no requirement that you ever must apply for your own retirement benefits.

However, if your own Social Security retirement benefit rate will be higher than your survivor rate when you reach 70, I can’t imagine what reason you’d have for not claiming the higher benefit. Delayed retirement credits (DRC) can’t be accumulated starting with the month you reach 70, so waiting past then to claim your own Social Security retirement benefits would not increase your benefit rate. Best, Larry