Ask Larry

Hi, I am still a little confused about the widow's limit and the application of the 82.5% cap. If I claim at 62 and am receiving 75% of FRA, then I get that the widow would be entitled to 82.5% instead. But I still do not understand why that would occur around 62 1/2 rather than at the survivor FRA. I understand that the reduction table shows a reduction to 82.5% around age 62 1/2, but it seems that the reduction would apply to the max benefit available (82.5%) and not to the FRA benefit amount. Taking it a step further, if the widow took the survivor benefit at age 62, the table shows it would be reduced to 80.5%. But 80.5% of what? Of the FRA, or of the 82.5% amount. I just can't wrap my head around it. Thanks so much.

Hi. If you start your benefits prior to your full retirement age (FRA), the maximum benefit rate that your spouse could receive as a survivor is the higher of your reduced benefit rate or 82.5% of your primary insurance amount (PIA). A person's PIA is equal to their Social Security retirement benefit rate if they start drawing their benefits at FRA. So, if you start drawing your benefits early at a rate of 75% of your PIA and if you don't lose any benefits to the earnings test or voluntarily suspend your benefits between FRA and age 70, then your widow(er) could be paid a MAXIMUM of 82.5% of your PIA as a survivor.

However, if your widow(er) claims survivor benefits prior to their FRA, their actual benefit rate would then be limited to the LESSER of 82.5% of your PIA, or your PIA reduced by the normal reduction for age factor that applies to widow(er) benefits. For example, if a widow(er) claims benefits at age 60, their survivor rate would be equal to 71.5% of their deceased spouse's PIA. Therefore, if the chart that you refer to in your question says that your widow(er)'s reduced age 62 survivor rate would be 80.5%, it means 80.5% of your PIA.

One thing's for certain, filing for your benefits at age 62 would not only result in you receiving your lowest possible monthly benefit rate for as long as you live, it would also limit your widow(er) to their lowest possible potential survivor rate. Your best filing strategy depends on many different variables, so before you decide when to apply for benefits you should strongly consider using our software (https://maximizemysocialsecurity.com/purchase) to fully compare and analyze all of your options so that you can choose the best overall strategy to maximize benefits for you and your spouse.

Best, Jerry

I work from 1981 until 2015 full time got lay off.(2015) Now Working par time for the city of San jose ca Only 10 hrs a week.
Can I apply for social security at age 62?

Hi. Yes, anyone who has at least 40 quarters (QC) of Social Security covered earnings can claim Social Security retirement benefits as early as age 62. However, if you continue working and if you earn more than the earnings test exempt amount, Social Security will need to withhold $1 of your benefits for each $2 that you earn in excess of the exempt amount. The earnings test exempt amount in 2023 is $21,240. The exempt amount is higher in the year you reach full retirement age (FRA), and there is no limit on the amount you can earn and still collect all of your benefits starting with the month you reach FRA.

Also, assuming that you were born in 1960 or later, claiming your Social Security retirement benefits when you turn 62 results in your benefit rate to be reduced to roughly 70% of the amount you'd receive if you waited until your FRA to start drawing benefits. Your best filing option depends on many different factors, so before applying you should strongly consider using our software (https://maximizemysocialsecurity.com/purchase) to fully compare and analyze all of your options so that you can determine your best strategy for maximizing your benefits.

Best, Jerry

Hello Larry
I am a UK citizen who worked in the US for a number of years. I presently receive SS benefits. I am very shortly eligible for my UK state pension. I am aware the WEP will probably affect may affect my US benefits. I am classed as a Non Resident Alien in the US. SS benefits are my only US income and tax is withheld at source so I do not have to submit US tax returns.

I am unclear if it is worth claiming my UK state pension ( it is significantly lower than full benefit).

1) What is the formula used to calculate the amount of WEP reduction on SS benefit?
2) How do I inform the SSA or do the UK authorities automatically inform them

Thanks

Susan

Hi Susan. Social Security calculates a person's Social Security retirement benefit using their average monthly earnings in their highest 35 earnings years adjusted for average wage growth. The average earnings are then separated into three tiers based on the year the person reaches age 62, and a different percentage return is applied to each tier. The normal percentage return on the first tier is 90%, the percentage return on the second tier is 32%, and the percentage return on third tier is 15%. The resulting sum of the three tiers is determines the person's primary insurance amount (PIA), which is the amount they would receive if they start drawing benefits at full retirement age (FRA).

For example, for a worker who turns 62 in 2022, the first $1,024 of average monthly earnings is multiplied by 90%; earnings between $1,024 and $6,172 are multiplied by 32%; and the balance by 15%. The sum of the three amounts equals the PIA, which is then decreased or increased depending on whether the worker starts benefits before or after full retirement age (FRA).

The Windfall Elimination Provision (WEP) modifies the normal Social Security benefit formula by reducing the percentage return on the first tier from 90% to as low as 40%. For a person reaching age 62 in 2022, that can result in a PIA reduction of as much as $512 (i.e. $1024 x 50%).

However, there is a WEP guarantee provision that limits the amount that a person's benefit can be reduced by WEP to no more than half of the person's non-covered pension. In your case, that means that your U.S. Social Security benefit rate couldn't be reduced due to WEP by more than roughly half of the amount of your UK pension. Therefore, the amount you gain by claiming your UK pension would likely more than offset any amount of WEP reduction applied to your U.S. benefit rate.

Assuming that you do file for and receive a UK pension, you need to report that fact to U.S. Social Security. I'm not sure what type of information is exchanged between the U.S. program and the U.K. program, but nonetheless it is your responsibility to report to Social Security if and when you begin receiving a pension that's based on your earnings that weren't subject to U.S. Social Security taxes.

Best, Jerry

I repaid $6200 SSA overpayment in 2022 because I made to much money in 2021. Should I file an amended 2021 return?

Hi. I'm sorry, but my expertise is limited to Social Security benefits so I'm not able to answer your question. You'll likely need to check with the IRS or a tax expert.

Best, Jerry

I'm waiting until age 70 to claim SS benefits. For the first extra 12 months, I understand my delayed retirement credits would each be worth
.06667 x (age 66) monthly benefit. Would the value of each DRC go up in subsequent years with COLA increases to my estimated monthly benefit or stay the same as the original DRC? Thanks.

Hi. Yes. However, delayed retirement credits (DRC) aren't compounded. Any DRCs that a person accrues are applied to their primary insurance amount (PIA), which is equal to the amount of a person's Social Security retirement benefit if they start drawing benefits at full retirement age (FRA).

Cost of living (COLA) increases raise a person's PIA, though, which in turn raises the dollar value of each DRC. For example, say Bob files for benefits at age 70. Bob's full retirement age (FRA) is 66, and his PIA at the time that he reached age 66 was $1800. However, by the time Bob reaches age 70 his PIA has increased to $2000 due to COLA increases. Bob earned 48 DRCs by waiting until age 70 to start drawing his benefits, raising his benefit rate by 32%. That 32% increase would then be applied to Bob's COLA-increased PIA, resulting in a monthly benefit rate of $2640 (i.e. $2000 x 1.32).

Best, Jerry

My husband will be at full retirement in April 2023. He will begin drawing at that time. When can I draw spousal benefits? If I do will my personal benefits continue to grow?

Hi. Assuming that you're at least age 62, you could claim spousal benefits as early as the first month that your husband starts drawing his benefits. However, unless you were born prior to January 2 1954 you can't apply for spousal benefits without also being forced to claim your own benefits at the same time (https://www.ssa.gov/benefits/retirement/planner/claiming.html). So, if you were born after January 1 1954, the only way that you'd qualify for spousal benefits is if your husband's primary insurance amount (PIA) is more than twice as much as your own 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).

If you were born prior to January 2 1954, though, and if you aren't already drawing your own benefits, you could then claim spousal benefits when your husband starts drawing his benefits while allowing your own Social Security retirement benefit rate to keep growing until you reach age 70.

Regardless of when you were born, though, your best filing strategy depends on numerous different variables. You and your husband may want to strongly consider using our software (https://maximizemysocialsecurity.com/purchase) to fully compare and analyze all of your various options so that you can determine the best overall strategy for maximizing your benefits.

Best, Jerry

MY MOTHER RECEIVES SOCIAL SECURITY BECAUSE OF MY FATHER... MY FATHER DIED AND HAS ANOTHER MRS... BUT HE DID NOT MARRY AND MRS... IS NOT LEGAL IN THE UNITED STATES SHE CAN MAKE THE CLAIM AND THEY TAKE MY MOTHER'S BENEFIT

Hi. The only way that your mother's survivor benefits could be taken away is if her marriage to your father wasn't legal, or if she doesn't meet one of the other requirements for entitlement (https://www.ssa.gov/OP_Home/handbook/handbook.04/handbook-0401.html). There isn't enough information in your question for me to be able to give you any specific advice, but if Social Security does stop your mother's benefits she can appeal their determination.

Best, Jerry

I applied for Social Security in June to be eligible to start in September, 2022. My approval was late, so I paid my Medicare premium for September and it was also deducted from my September, 2022 payment I received in October. I've called several times and I can't get a clear answer as to when I will get a refund. Is there a form or some other "official" way to make this happen? It's almost January, 2023 and I've been assured there is a double payment, but I can't seem to be able to pin down when I'll receive a refund and in what form (check or electronic deposit in my checking account). Thanks for any advise or assistance you can offer.

Hi. No. If you an excess Medicare premium was deducted from your Social Security benefits then that excess amount should be refunded automatically. If it isn't, you'll need to follow up with Social Security, or you may want to try contacting the offices of your U.S. congressional representative or one of your U.S. senators for help in dealing with Social Security.

One thing I should mention, though, is that the Medicare premium deducted from your September Social Security benefit payment that arrives in October pays your Medicare premium for OCTOBER, not September. Even though Social Security benefits are paid a month behind, the Part B Medicare premiums deducted from those benefits pays for the current month's coverage. In other words, Social Security benefits paid in December are for November, but Part B premiums deducted from those payments cover the person's Medicare premium for December, not November.

Best, Jerry

I am collecting widow's benefits in 2023 and the earnings cap is 21,240. I am inquiring if my HSA deductions will reduce the earnings. HSA deductions are not subject to FICA and therefore not part of Box 3 (SS Earnings) of the W2. You answered the following which contradicts the information I have. I'm new to this so want to make sure. Can you tell me which is right? Thank you.
This was part of your reply in 2020 to Jerry:
Contributions to an HSA can't be used to reduce your countable earned income for purposes of Social Security's earnings test. Basically, Social Security will count for earnings test purposes the amount shown as 'Social Security Wages' on your W-2 form, assuming that Social Security taxes are deducted from your wages

Hi. What I was attempting to explain in my prior answer to which you refer is that for earnings test purposes Social Security counts the amount that you earn in a year, which can be different than the wage amount that's subject to income taxes. Therefore, unless your HSA contributions are made as part of an actual salary reduction agreement with your employer, they won't reduce the amount of earnings that count for purposes of the earnings test.

The bottom line is that Social Security will count the amount shown in the block on your W-2 titled 'Social security wages', not the amount shown in the block titled 'Wages, tips, other compensation'.

Best, Jerry

I am 69 yrs old. I took SS at age 65 in 2018. I have 50+ years of earnings. I went back to work in 2022 and made $17K+ of earnings from a part-time job. Will this amount replace a lower earnings year of the 35 SS used to calculate my benefit? And if so, will my benefit be re-calculated automatically and be increased? When??

Thank you,
Denise

Hi Denise. Social Security retirement benefits are based on an average of a person's highest 35 years of Social Security covered wage-indexed earnings (https://www.ssa.gov/oact/progdata/retirebenefit1.html). Therefore, your 2022 earnings will only increase your benefit rate if those earnings were higher than one of the 35 WAGE-INDEXED earnings years on which your current benefit rate is based.

If your 2022 earnings were in fact higher than one of your previous highest 35 years of wage-indexed earnings then Social Security should automatically recalculate your benefit rate. Benefit increases resulting from 2022 earnings are effective with a person's benefit rate for the month of January 2023, but the automated recomputations generally aren't processed until around September of the year that the increase is due. But, when Social Security processes the recomputions they pay any back pay that's due.

Best, Jerry