Today’s Social Security column addresses questions about how to take spouse benefits while deferring retirement benefits until age 70, whether forming an LLC will avoid the effects of the income test, and when divorced spousal benefits may be available. Larry Kotlikoff is a professor of economics at Boston University and the founder and president of Economic Security Planning, Inc.
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Do I have to suspend my Social Security pension to collect my partner’s benefit?
Hi Larry, My husband was both born in 1953. My husband will work until he turns 70 and I will retire at 66. We have not yet applied for Social Security benefits because we were thinking of waiting until age 70 to receive our maximum benefit. We are looking for your advice on when to submit.
At age 70, my husband’s estimated monthly benefits will be about $3,500 and mine at 70 about $2,250. If my husband has filed his 70th birthday, should I file and suspend my retirement benefits and receive a partner’s benefit? If so, is that 50% of my husband’s benefit percentage? Then at age 70 I would of course take my own increased pension benefit. Thank you Laura
Hi Laura, You would certainly want to claim spousal support when your husband starts to receive his benefits, but you would not do that by applying for and suspending your own benefits. If you claim and suspend your retirement benefits, you will not be able to receive a partner’s pension, even if you qualify.
If you plan to wait until age 70 to receive your retirement benefits, you must submit a limited application for partner benefits from the first month your spouse is entitled to benefits.
Submitting a restricted application means that you are specifically limiting the scope of your application to just partner benefits. You must then submit a separate application for your pension benefit if you want to switch to your own account, presumably at the age of 70.
Also, your partner’s benefit will be 50% of his primary insurance amount (PIA), which is equal to his full retirement age (FRA) retirement benefit, not 50% of his increased benefit at 70.
However, since both you and your husband were born before 1/2/1954, this opens up a number of other possible submission options that you might want to consider at the very least. You and your husband may consider using my company’s software — Maximize my social security or MaxiFi Planner — to ensure that your household receives the highest lifetime benefits. Social Security calculators provided by other companies or non-profits can make good suggestions if built with extreme care. Dear Larry
Is it better for me to be in an LLC?
Hi Larry, I’m 62 and I’m starting Social Security this year. I started a part-time delivery business to keep busy. Should I be an LLC? I will probably earn less than the Social Security allowance. Thanks, Rick
Hi Rick, If your earnings don’t exceed the Social Security income test exemption amount, it doesn’t matter whether your earnings come to you directly or through a small business.
Any earned income you have, which is a combination of gross pay and net self-employment income, would count toward the exempt amount for the Social Security Income Test. The amount exempt in 2022 is $19,560. As long as you earn less, this will not affect your benefit. Dear Larry
Does my ex have to receive benefits before I can claim divorce benefits?
Hi Larry, Does it matter if my ex-husband is currently receiving Social Security retirement benefits or not before I can apply to collect my partner benefit while mine can continue to grow to 70? He is currently 62 and I am 61. Thanks Kim
Hi Kim, You may be able to claim divorce benefits as early as age 62, even if your ex is not receiving retirement benefits, but only if your ex is at least 62 and your divorce has been final for at least two years.
However, as long as your ex is still alive, you can never file for divorce and grow your own benefit until the age of 70. Only people born before 1/2/1954 are allowed to do that. Dear Larry