Ask Larry: Will 15 Years With $0 Income Lower My Social Security Retirement Benefit?

Today’s column addresses questions about whether a number of years with no income taxed by Social Security will actually lower retirement benefits rates, whether it’s possible to be reimbursed for a gap in different types of benefits and how spousal benefit rates are determined. 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 15 Years With $0 Income Lower My Social Security Retirement Benefit?

Hi Larry, My wife and I have been running a non-incorporated business and file our taxes jointly. I just discovered that the for the last 15 years Social Security earnings have all been assigned to her and show $0 for myself. Taking into consideration that these years have been of lower taxable income, will these 15 years of $0 lower my Social Security retirement benefits? Thanks, Ron

Hi Ron, Having zero earnings in a year doesn’t lower your benefit rate, it just doesn’t increase it.

Social Security retirement benefits are based on an average of a person’s highest 35 years of Social Security covered wage-indexed earnings. If you have fewer than 35 years of covered earnings, zero years are used in the 35 year average. That obviously results in lower average earnings and, it turn, a lower benefit rate.

You could potentially ask Social Security to split your past business earnings between your and your wife’s earnings records, but that would mean removing earnings from your wife’s earnings history and adding them to yours. And depending on your and your wife’s entire individual earnings histories, taking earnings away from her to add to your record might mean lowering her benefit by more than it would increase your benefit.

Furthermore, removing earnings from the record of the member of a couple with the higher average earnings history could have an adverse effect on potential survivor benefits.

It sounds like you and your wife may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to fully analyze the options available to you in order to determine your best strategy for maximizing your benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

Will I Be Reimbursed For The Months That I Wasn’t Collecting Widow’s Benefits?

Hi Larry, I’m a widow and at 60 I started collecting widow’s benefits. I turned 65 this past December and called and switched over to my retirement because it was more.

The very next day I called back because I realized if I would wait until 66 and two months, I would get $220 more a month. So they told me I could do a withdraw by filling out a 521. I did just that.

I got bill in mail three months later to pay back all monies I got for last several months. I understand that. But when I try to go back and claim widow’s benefit again, will I be reimbursed for the three months I have missed during this time and of course continue on widow’s benefit until I’m 66 and two months old?

Or will they deny me of widow’s benefit because my retirement benefit is higher than my widow’s benefit? Thanks, Kim

Hi Kim, That’s a bit of a thorny problem. If your own Social Security retirement benefit rate is higher than your unreduced widow’s rate, then Social Security would have terminated your widow’s benefits effective the month of your Social Security retirement benefit entitlement.

In that case you could need to reapply for widow’s benefits in order to resume eligibility for those benefits. And since no retroactivity is allowed when you apply for benefits prior to full retirement age (FRA), that would mean that your widow’s benefits couldn’t be resumed until the filing month of your new application for widow’s benefits.

In other words, it sounds like there could be a gap between when your widow’s benefits terminated and when they could be resumed. It’s possible, though, that a protective filing date may have been established that would prevent a gap in your widow’s benefits, but if there is a gap in your widow’s benefit entitlement then I believe you could ask Social Security to reopen their prior determination to terminate your widow’s benefits based on new and material information.

Specifically, the new and material information in your case would be that the withdrawal of your retirement benefits causes you to remain eligible for widow’s benefits.

On the other hand, if your retirement benefit rate is lower than your unreduced widow’s rate, then Social Security should have just suspended your widow’s benefits rather than terminating them. In that case, your widow’s benefits should be automatically reinstated retroactively without your needing to file a new application.

The bottom line is that I can’t give you a definite answer without access to your full Social Security records. Social Security employees are the only people with access to your full records, so you’ll need to keep working with them to resolve this issue.

By the way, you may want to strongly consider waiting until 70 to switch from widow’s benefits to your own retirement benefits. Your retirement benefit rate would grow at a rate of 8% per year between your full retirement age (FRA) and age 70 as long as you delay switching to your own benefits. Best, Larry

Is There A Way For My Wife And I To Get More Because Of Our Age Difference?

Hi Larry, My wife is taking Social Security retirement benefits at 62 for $960. I am 80 and getting $2,057. Is there a way to get more because of our age difference? Thanks, Oliver

Hi Oliver, There’s nothing specific to your and your wife’s age difference that would make you eligible for higher benefits under the Social Security law. Your wife could only qualify for spousal benefits while you’re living if 50% of your primary insurance amount (PIA) is higher than your wife’s PIA. A person’s PIA is equal to their Social Security retirement benefit rate if they start drawing their benefits at full retirement age (FRA).

You don’t mention at what age you started drawing your benefits, so I can’t tell you whether or not your wife might qualify for spousal benefits. But, if your wife has applied for her own benefits and if she qualifies for spousal benefits, then Social Security should have required her to apply for both benefits. So it sounds as though you and your wife are likely getting all that you can from Social Security.

Your wife could have gotten a higher monthly benefit rate if she had opted to wait until a later age to start drawing benefits, but apparently she decided to she’d rather start drawing sooner at a lower monthly rate. Best, Larry