Monday, August 18, 2008

Divorced Wife Possible Extra Benefits

Question: My ex husband, Earl G. M., age 76, received approx $2,000 a month after Medicare..........and, I, Evelyn C. M. am receiving $600 a month. I am 73 years old and the $600 is my only income. Would it be possible for me to receive more from Social Security?

Answer: Well Evelyn, it depends on just what kind of benefits you are receiving. You don't give enough information. Are you receiving the $600 on your own earnings record or as a wife/ex-wife? If you are receiving as a wife or ex-wife , are you also collecting on your own account? (Probably). If the $600 benefit is based on your ex-husband's account - a divorced wife's benefit - then that would most likely be all you can collect for social security benefits.

But if you are collecting only on your own account, you may be eligible for some extra money on your ex's account too. It depends on both your and his primary insurance amounts (PIA). This is the amount before any age reduction. A wife's benefit (and an ex-wife's) is determined by subtracting the wife's own primary insurance amount from one-half of the primary insurance amount of the husband. So if your ex-husband's PIA is $2,000, one-half is $1,000. If your PIA is $600, you can collect the additional $400 difference as an ex-wife. But, you must have been married at least 10 years.

I hope this helps you. If you think you may be eligible, you should apply without any further delay. You could lose some benefits because in your case an application cannot be retroactive for any more than 6 months, so get going! If you can't get to the SS office right away, send a letter telling them you want to claim ex-wife's benefits. This will protect your filing date.

One other avenue you may explore if you have limited assets and little income, is Supplemental Security Income payments, which are also handled by SSA. These are designed for people over 65 (as well as for the blind and disabled) in financial need. Eligibility depends on your assets (not counting your home), your income and your living arrangements. If your only income is the $600 you should question SS about you eligibility. Some states add a supplement to these federal payments. And if you are eligible for SSI you may also receive Medicaid, which pays for some things not covered by Medicare.

I wish you all the best.

Sunday, July 27, 2008

Dinner Table Talk

Question : Mr. Tomkiel,

Your Social Security Benefits Handbook has generated some interesting conversations at our dinner table. The father of my wife's cousin died when his daughter was 2 1/2 years old. If I correctly understand Section 404.3 on page 81, The application for Survivors' Benefits for that daughter "usually should be filed within six months of the date of death." Her mother was unaware that her daughter might have been eligible for benefits, so has not applied for benefits. The daughter is currently more than 40 years old. Is there any possibility of collecting any of the monies that probably would have been paid many years ago if an application had been submitted, or have benefits been lost due to the elapsed time?

I look forward to your response.

Jack from New York State

Answer: Sorry, but the six-month limitation applies. The time has long passed to apply for those benefits. But it never hurts to ask. I must say though that I am flattered that my book has generated dinner table conversation at your house!

Caregiver Benefits

Question: My parents are 80 and 85 years of age. I have recently had to consider moving in with my parents to become a full time caregiver as their health has declined very rapidly in the last two months. My parents’ doctors are aware that they are not capable of living alone. In a case such as this, are there any provisions given for caregivers as I need to work full time and will have to give up any outside employment. Other than my plan to take care of them, the only other option would be nursing homes. Thank you for this consideration.

Brenda from Kentucky

Answer: Sorry Brenda, there are no such provisions under Social Security.

I don’t know if they would qualify, and apparently it is a very difficult and time-consuming process, but your parents may qualify for some cash assistance from the Veteran’s Administration to help cover the cost of home care attendants. This program is called Aid & Attendance benefits. To be eligible, a veteran must have at least 1 day of wartime service, and the assets, not counting a home and a car, must be under $80,000. There are also income restrictions, but the cost of medical and health care assistance is deducted from income. Before contacting the VA, see the very helpful website VeteranAid.Org.

Sunday, July 6, 2008

Earnings At Age 69

I would appreciate your reply to my question, for I do not wish to break any laws and forfeit my social security benefits. I am a 69-year old small business owner, currently working in my business. Beginning September 2004, I receive $650 per month social security money. Because of the economy, I am considering applying for a part-time job which will pay me $500 per month. If I accept this job, will I be required to forfeit my social security earning? How much, if any, over my monthly $650 benefit may I earn? Please reply.

Thank you,

Erma from California

Don’t worry Erma. Good news! You can earn as much as you are able without any SS penalty because, at 69 you are well over Full Retirement Age. Earnings have no effect on your benefits at your age so go ahead and take that job. You will not forfeit even 1 cent of your social security benefits. I sincerely hope that all goes well for you, and your business picks up too, God willing.

Friday, July 4, 2008

Vacation Pay & Waiting Till 66

I am planning to retire on August 1, 2008. I am 64 yrs old and not planning to collect social security benefits for another 2 yrs. If I get paid in lieu of my unused vacation time, would it affect my social security payments?
Jitendre from New Jersey

Unused vacation time is counted as earnings, but there are limits on this for purposes of the “retirement test.” Any payments made on account of retirement are counted as earnings in the month last worked, unless they are earned in a prior year, in which case that portion of the vacation pay attributable to the prior year does not count in the current year’s earnings for “retirement test” purposes. If you don’t plan to apply for benefits until 2010, the 2008 earnings will have no effect for the “retirement test” in 2010. If the unused vacation time is paid out to you after you retire this year, and you have accumulated so much time that it extends into 2010, it still doesn’t affect 2010 benefits.

In fact, no matter how high your 2008 earnings, you could collect reduced retirement benefits for August through December. Because your earnings in these months will be under the monthly limit of $1,130 applicable to you this year, benefits for these months cannot be withheld. These are called “non-service” months. I discuss this in Chapter 8, Social Security Benefits Handbook. Click on the link and scroll down to Section 804, The Monthly Earnings Test.

But Jitendre, your plan to wait till age 66 to collect benefits even though you are retiring now may not be in your best interest. The only reason to forego benefits now would be to get an unreduced benefit at age 66. As I have discussed in an article which was published on the Basil & Spice blog, this may not pay off for you. You may read my article that was posted on April 20, 2008. Click the title "Social Security Benefits, Now Or Later?"

You may want to reconsider passing up two years of benefits, or at least figuring out how long it will take to recover them after 66.

What Happens If An SSI Disabled Person Marries?

Could you tell me what happens to SSI benefits if the disabled person marries? Do the benefits become affected if one marries someone who is not on SSI, and is working full time?
Mara from Washington State

To answer your second question first: yes. SSI payments are affected by the income and resources of an ineligible spouse. This is because such payments are based on need rather than your earnings record, as in the case of regular social security disability benefits (SSD benefits).

So, effective with the first day of the month you marry, your husband’s income and assets will be deemed to be yours. Depending on the amount of the earnings and assets, you may become ineligible for SSI, or your monthly payment amount may be reduced.

As an SSI recipient you are required by law to report any change in your marital status.

Contrariwise, regular SSD benefits, based on your earning's record, are not affected by your husband’s income at all because they are not based on need. Many people confuse SSI disability payments with SSD benefits, but they are very different, one being a federal welfare program, the other a social insurance program paid for by the worker’s prior payroll taxes. Some people receive payments under both programs, if the amount of the SSD is smaller than the SSI payment. In such a case only the SSI payment is affected.

Tuesday, July 1, 2008

Deferring Benefits To Get Delayed Retirement Credits at 70

On the PBS Nightly Business Report show on Memorial Day, they did a "Retirement Special", as markets were closed.
They briefly passed by on a retiree (believe close to 70) that decided to return what benefits he had received, to restart his SS LATER, at a higher amount..
We have your 8th Edition, don't believe I ran into what rules exist, like how long one has to do this, etc..
PS: My Mom, now 92 was a SS Claims Rep, and I was a Fellow of the Society of Actuaries in my younger days, and Enrolled Actuary, but have moved on into retirement investment management business.
My wife turned 62 May 31st, so that's why we have the book!

Roland from Illinois

A beneficiary can withdraw an application. All benefits, including those of dependents, must be returned. I discuss the process in Section 414 of the Social Security Benefits Handbook. I recently did any article about deferring benefits till age 70. The reason to do so, or to withdraw a previous application and return benefits, as in the example you provide, is to get the advantage of the Delayed Retirement Credits, which now come to 32%.

Look for the article which will be posted soon at Basil and Spice, a very helpful blog for improving your life. Click the My Article on Basil and Spice in the resources box at the top right.

I posed a question to financial types in that article. You seem to be a likely candidate based on your background and current position. Can one buy a lifetime annuity at age 70 for $98,000 (the benefits received from age 66 to age 70 at the approximate current maximum rate) that will pay more than $640 per month plus annual COLA increase? This would be the approximate gain from the maximum Delayed Retirement Credits for deferring benefits till age 72. So is it worth it?

P.S. God bless your mom! Maybe working for SSA had some long-term benefits.

Wife's Benefits- Husband's Earnings

My wife will turn 62 in September. I am 62 but am also still working. My income level is in the low 6 digits, hers is zero. I have been unable to find any references to the impact of my income on her benefit. We generally file 1040 as MFJ. Is my wife's benefit impacted by my income and if so what publication would you recommend I review for details. Thank you.
John from South Carolina

Answer- Your wife cannot collect as your spouse on your account if you don’t also apply for benefits. But if your wife has worked the required 40 quarters and is eligible on her own account, your income will not impact your wife’s benefit. However keep your eye on that taxman (“’Cause I’m the taxman, Oh Oh the taxman” as George Harrison put it). The benefits may be subject to taxation as per the usual rules for taxation of SS benefits. When your joint income exceeds $32,000 (this is the limit for married filing a joint return), you pay tax on 50% of the excess income over $32,000 up to $44,000, then 85% of the excess income over $44,000.

And hey John, keep in mind the “non-service” month provision. If your earnings are under the monthly limit for any calendar month you’re over 62, you can get the monthly benefit for any such month. It doesn’t matter whether or not you are retired, only what your earnings are for that particular month or months (including sick and vacation pay).

When you become eligible for benefits, your wife may be entitled to some additional benefits as a spouse on your account, but only if her primary insurance amount (her benefit before the age reduction) is less than one-half of yours. If so, then she can receive the difference up to that one-half amount. But if she is under full retirement age when she becomes entitled to that, the wife’s portion will be reduced for age too, at the wife’s reduction rate, which is a bit greater than the retirement reduction.

Saturday, May 10, 2008

Trouble Understanding


I salute you for understanding this stuff. Thanks for the response. I'm still having some trouble understanding it, but I know if I read it enough times it has got to click. Sometimes I'm a little slow on the uptake.

Tony from Tennessee


Thanks. I know how you feel. It always takes time for new and complex concepts to sink in. Once you get the big picture and the basic concepts down, it all comes together. In your question you spoke about getting the "penalty" back. The "penalty" is actually 2 things: the reduction factor used to calculate the benefit amount for months before Full Retirement Age (FRA), and then the witholding of benefits required to satisfy the annual earnings test applicable to those under FRA. The witheld benefits are not paid back, but the reduction factor is re-adjusted at FRA.

Hope this helps a bit. You are not alone in having some difficulty in grasping all this right away. Feel free to send follow up questions if something is unclear.

Tuesday, May 6, 2008

Adjustment of Reduction Factors at Full Retirement Age

Enjoyed your online book very much. Talk about easy to read!
I will turn 62 at year end, and plan on continuing work and applying for benifits. Based on my expected income, I will probably be penalized approximatly $8900 annually. I don't know where I got this idea, but somewhere I thought I read that this penalty eventually comes back to the recipent after full retirement age is reached (66 in my case). Could not find a reference to this in your book. Am I correct in this?
Thanks in advance, and thanks for the excellent work in this book.
Tony from Tennessee


Thanks for the compliment, flattery gets you everywhere!

Sorry, but the "penalty" you refer to does not come back to you. That's the bad news. The good news (and what you were probably thinking about) is that the number of reduction months used to figure your benefit amount before Full Retirement Age gets readjusted when you reach 66 to exclude any months which were used to withold benefits for the "penalty." They call this an "ARF" (one of the more memorable acronyms).

The benefit amount before Full Retirement Age is reduced by a fraction for each month under 66 as of when you first become entitled. The legal reduction factor is 5/9 of 1% of the primary insurance amount for each month of the first 36 months and for each month more than 36 months the factor is 5/12 of 1 percent.

If you start benefits at 62, that would be 48 months of reduction. That comes to 25% off the full benefit. If you have excess earnings that require witholding of some monthly benefits (the "penalty" you referred to), then the months come out of the reduction at age 66. So for example if at age 66 it turns out that you only received 36 full monthly benefits, then the reduction factor is readjusted to only a 20% reduction, for all benefits beginning with the month you reach Full Retirement Age. This is done automatically without you having to make any application for this readjustment.

Friday, May 2, 2008

Voluntary Suspension & Spouse Benefits

If the worker properly applies for Social Security benefits but "files and suspends" to age 70, the worker is therefore nevertheless "entitled." Can the spouse (at her FRE or at any other time before the worker turns 70) then file for a spousal benefit, even though the worker is not at that time receiving cash benefits? Assume the spouse has not applied for benefits based on her own record, and that if she did the benefit would be low, say 20% of the worker's benefit? Thanks.

Sam from DC

A spouse can receive benefits on the worker's account even if the worker suspends benefits to collect the Delayed Retirement Credits at age 70. Under this suspension procedure, only the worker's benefits can be suspended, not any of the beneficiaries on the account. There is no advantage for them anyway, because it is only if the worker's benefits are not paid that the Delayed Retirement Credit applies. If the spouse's benefits are only 20% of the worker's, then the benefit payment will never be greater than the spouse's benefit rate of 50%, or even at the maximum reduced spouse rate (35%) if she is under Full Retirement Age.

Sunday, April 20, 2008

Parents' Income Revisited

Thank you Mr Tomkiel for the answers. You did not answer my second question about parents receiving a reduced social security benefit , probably because I phrased it incorrectly. I understand that 85% of their social security income is taxed because of the higher AGI. My question is about the reduced social security benefit they receive every month - the checks are less - apparently because their total income (AGI) last year exceeded some trigger.
Mary Anne from Nevada

Sorry about that! The higher income does NOT affect the SS benefits under Title II (the regular SS benefits based on someone's earnings record).

But income does affect SSI payments if they receive them. It's possible to receive both kinds, and both are paid by SSA, so its easy (and common) to confuse them.

SSI payments are based on need, so income and assets are considered. Because a house may be excluded from countable assets for SSI purposes, the proceeds from the sale may now disqualify them for such payments if that is what they have been getting.

Or they may have elected to have taxes withheld from their SS benefits.

Ordinarily, whenever there is a change in benefit payments SSA will send a letter to explain the change. The letter might come some time after the change.

Full Retirement Age- Later Earnings

If a worker has reached full retirement age and is receiving benefits and continues to earn income, is social security deducted from those post-retirement-age earnings?

Paul from Washington State

Yes. The SS or FICA tax (they call it a "contribution" but try telling IRS you can't afford to make a contribution right now!) apPublish Postplies to all earned income in covered employment.

But if the earnings in a post-retirement year are higher than one of the year's earnings used to calculate the original benefit, SSA will re-calculate the benefit amount and any increase will be paid for years after the latest higher earnings year.

You can expedite that by bringing your w2 to the SSA office as soon as you get it and ask for a manual recomputation. They will do it automatically anyway, but it could be quite a while.

Rental Income

One of my clients, a 70 year old male, questioned me whether or not Rental Income is counted towards the taxation/witholding on their social security benefit payments. In reading section 806 I also noticed interest and dividend income may not count towards my clients' benefits. Would I be correct to say that only "Earned Income" is countable towards the reduction of SS income benefit?

Shawn from Pennsylvania

If you are talking about the taxation of benefits, no, because even unearned income is considered by the IRS to determine whether SS benefits are to be taxed. Section 806 of the Social Security Benefits Handbook discusses earnings that are not counted for the Earnings Test that SSA uses to reduce benefits if the earnings are over the exempt amounts. But this Earnings Test does not even apply to anyone over Full Retirement Age, such as your client.

Parents' Income Causes Taxation of Benefits

My parents are 86 and 92. Recently they sold assets to pay for medical expenses and that capital gain boosted their AGI on their tax form to high amounts. Their social security benefits appear to have been reduced because of their high AGI. Is that the case?

Many thanks
Mary Anne from Nevada

Yes. The AGI figure includes the capital gain, so 85% of the SS benefits are taxed if their joint return is over $32,000.

Husband's Gov't Pension

First, thank you for your book, for its education, contribution, and triggering the questions we have.

My husband is in a second career with the state and will receive a state pension after 10 years there. In his prior career in private industry, he contributed to the social security system for over 30 years at the amount that allows him to receive full social security benefits at age 66 as well as full state pension. Will my social security benefit from him, or my own earned social security benefit be reduced because of the state benefit?

Many thanks
Mary Anne from Nevada

No. What you are worried about is the Government Pension Offset. But this only applies to a Spouse's benefit where the spouse is entitled to the government pension. The worker can receive both public and private pensions. Because you didn't work in public employment, your SS benefits are not affected.

If your husband collects a spouse's benefit on your account, then that benefit would be subject to the offset. But if he worked 30 years, it's unlikely that he would qualify for a spouse's benefit on your account, because his primary insurance amount would have to be less than 50% of yours.

Self-Employment Non-Service Months- for Earnings Limits

Some Background:
Bob from NY previously asked about his recently widowed daughter who works less than 45 hours in self-employment. He said per week, but wrote back to say she actually is working less than 45 hours per month. This makes a big difference because the general rule is that a self-employed person who puts in less than 45 hours per month is able to use that month as a "non-service" month for the earnings test. If so, then the beneficiary can receive a benefit for such a month despite the annual earnings.

Bob also wrote back to ask what procedure to follow to get the benefits, so here it goes.

The first thing to understand is that SSA considers any claim by a self-employed person to be questionable because a business owner can control the reporting of income. The other thing is that the actual dollar amount earned is not a conclusive factor in deciding if someone is renedering substantial services. The reader would do well to read a couple of sections of my Social Security Benefits Handbook: Section 412 and Section 809. These sections provide more detail about how SSA handles these self-employment claims.

So Bob, your daughter must be prepared for some probing and detailed questions about her business and what she is doing, and what she is not doing. She should also know that SSA will verify her statements by contacting vendors, customers and may even come by the business to do a little spying! Yes, that's exactly right.

Your daughter must visit the SS office and put in an earnings report. If she hasn't filed an application for Mother's benefits she should do so. Because she is self-employed she must make a visit in person to the SSA office.

Note that non-service months are available only in the first year of entitlement.

SSA's Programs Operations Manual System (the POMS) discusses the rules for determining whether self-employment services are sunstantial. Here is the link:

Saturday, April 12, 2008

SSI & SSD & Plentiful Income

Is it possible to terminate SSDI and SSI(dual recipient) and Medicare and Medicaid(dual recipient) benefits voluntarily? ...For instance if you know new plentiful income (well over $900 set by SSA) is to start for yourself sometime in the future? What is the process and procedure? Especially if you want to time the ending of benefits and the begining of new income?

Thank You

Nightend from Mass.

OK- we have several questions here: Let’s start with SSDI. This stands for Social Security Disability Insurance. This program is not based on financial need, but rather is based on SS covered earnings, and the monthly benefits are determined by the earnings record of the beneficiary. After 24 months of entitlement to benefits a beneficiary is eligible for Medicare, which is totally different from Medicaid, a welfare-based medical coverage, which we’ll talk about in a minute.

NOTE: If the income you will receive is from something other than earnings, it will have no effect at all on your SSDI, and no effect of your Medicare entitlement. If the income is earned, from wages or self-employment, then it will result in a termination of your SSDI benefits ONLY if it substantial. For wages in 2008, this means over $940 per month ($1,570 if you’re blind). There are special rules for the self-employed, (Section 504 of the Social Security Benefits Handbook).

Even at that, you may be eligible for a Trial Work Period before SSA determines you are no longer disabled, whereby you can work for 9 months (they don’t have to be consecutive – but they only count if within a 60 month rolling period- see Section 509 of the Social Security Benefits Handbook for a discussion of the Trial Work Period). If so, they will not terminate your benefits until the third month after that, so it is possible to receive up to 12 months of benefits after you return to work. If you are not medically recovered, but your benefits terminate only because you are working, you may continue to be covered by Medicare for another 8 ½ years after you start working.

The rules are totally different for SSI. Because it is a needs-based welfare program, income from any source, earned or unearned, offsets your payments and affects eligibility for Medicaid. However, if your are still disabled, you may be eligible for Medicaid continuation under the Ticket To Work Program. Here’s a link for that: Medicaid Ticket To Work Program

The timing for this is within your control simply by deciding when you want to begin working, if that is the source of your new income. Once you begin receiving income, you must report it to SSA and the state agency that provides your Medicaid coverage, like the Department of Social Services.

Substantial Services in Self-Employment

My daughter was recently widowed. She has 2 young children. In her discussion with Social Security, she asked about relief from the earning limit on her survivor's benefit because she works less than 45 hours per week. The Social Security interviewer told her that the "substantial services" rule, which you discuss in Section 804, is only applicable to disability cases, not survivors. Is that correct?

Bob from NY State

I’m sorry to hear about your daughter’s loss. The “substantial services” 45 hours rule for self-employment is per month, not per week. This rule applies in survivors and retirement claims, and only for self-employed persons. So although the SS worker was wrong, it won't seem to help your daughter, unless you meant "month" rather than "week."

If you need the citation to the POMS (SSA’s operating rules) it is RS 02505.65- “Meaning of Substantial Services in Self-Employment.

The substantial services rules for disability cases are much more complex, because they serve a different purpose, i.e. determing if someone is disabled.

Deferred Benefit strategies

Facts: Husband age 63, born 1945.
Wife age 61, born 1947. Husband will wait till full retirement age of 66 to collect S.S.
Husband and wife have stopped working, drawing on IRA money for now.
Husband and wife have worked since the 60’s, both qualify for S.S. benefits. Wife's S.S. earnings and S.S. taxes equal about 80% of husband’s.

In order to NOT leave any S.S. benefits on the table, so to speak, what would the best scenario be for wife to start receiving benefits, at what age? We are looking to maximize combined benefits as a couple.

If wife collects at age 62 at a reduced level, (husband would be 64 and has chosen to wait to 66) and then qualify for spouse benefits (one half of husband’s) when husband is 66, would this maximize our combined benefits? However, wife's OWN record benefits would probably be around 80% of husband's, thus greater than spouse benefits of one half. Husband and wife both assume to live at least to break-even age of around 80, thus it may make sense for both (if taken individually) to wait to age 66 to collect 100%, unless there is a scenario to start wife's benefits between 62 and 66?

Thank you for your help; I hope to hear from you.
Norm from Mass.

The only sure way to not “leave any ss benefits” on the table, as you put it, is to collect them before you die. If you do not need the income, then you can bank the benefits and earn interest. If you die before collecting, those benefits are gone for good.

When you consider the idea of not taking a reduced benefit to wait and get the unreduced benefit, a "deferred benefit strategy", you must calculate the costs, i.e. the loss of the benefits you defer to collect a higher amount later, and then figure out how long it will take at the higher rate to recover the loss up front.

Please note that your idea of your wife taking her own reduced benefits and then switching to a reduced wife’s benefit when you turn 66 won’t work, because the regulations don’t allow that. Because your wife’s benefit is 80% of yours, she will not qualify as a wife when you decide to become entitled, because her primary insurance amount is greater than 50% of yours. The only time a spouse can elect between her own benefit or her husband’s is if she is of full retirement age. Same holds true for husbands.

You can elect to take spouse’s benefits instead of your own only when you are at full retirement age (66 for you), not before.

However, if you are not planning to collect till age 66, you have an option that will reduce the break-even age for you. You could take a spouse’s benefit on your wife’s account then, defer entitlement on your account till age 70, drop the spouse benefits, then get your own benefit with the Delayed Retirement Credit, which would add another 32% to your benefit amount.

Of course you still run the always present risk of dying before you reach 70, and the further risk of dying before you recover back the deferred benefits. That's why I would never reccomend this type of strategy.

With that warning, let’s look at an example. If your benefit is $2,000 unreduced, and your wife’s unreduced is $1,600, you could collect $800/month at age 66. That would be $1,200/mo. less than if you took your own benefit. For the 48 months between 66-70, that’s $57,600. If you then take your own benefit at 70, the Delayed Retirement Credit would add $640 per month. Of course, these are just sample figures and don’t take into account any COLA’s that would occur, nor any interest you may have earned if you banked the money instead of deferring it. Anyway, just using these straight-line figures, it would take you till age 77.5 to make back the deferred benefits (57,600 divided by 640 = 90 months = 7.5 years after age 70).

In my opinion, life is so fleeting that any strategy of deferred benefits is risky. Although the risk is somewhat lessened in your case because you can elect the unreduced spouse benefit at 66, so you are not deferring the entire amount of your benefit. But still, $57,600 is a lot of money, and 7.5 years after age 70 is a long way off. And that's just to get the money back. You only get the advantage (at $640/mo.) for as long as you live (or your wife if she survives you via the widow's benefit which will be what you were receiving). Who can predict these things?

Remember the old saying: a bird in hand is worth two in the bush! And the famous Wimpy (of Popeye fame) plea: "I will gladly pay you Tuesday for a hamburger today!"

If you take the higher benefits now, you will pay later - much later - by reason of a benefit not being as high as it might otherwise be. If later doesn't come for you (or your widow), you never pay.

Saturday, March 15, 2008

I retired from the federal government on 12/31/03 at age 69 with past earnings above the maximum level. I worked full time and also received SS benefits in 2003. My monthly benefit was $1935 in 2004 increasing with COLA to $2186 in 2008. Looking at Appendix D in your handbook, I notice that maximum earning level monthly SS benefits for retirement at age 70 incease much faster than COLA (for example, from 2004 to 2005 at 6.7%, from 2005 to 2006 at 7.5%, and from 2006 to 2007 at 10.4%). It seems unfair that future retirees receive much greater monthly benefits than I because their annual increase is not constrained by COLA.
Bill from Maryland

There are many such "inequalities" in the social security system just as in all social programs. But there is a reason for this one that makes it less "unjust" than it may appear. The later beneficiaries are not receiving a higher COLA than earlier ones. COLAs are the same for every beneficiary. Rather, the base benefit, the "primary insurance amount" (PIA) is higher for later retiress because the average wages used in the computations of benefits is higher for later retirees. The computation for a benefit amount uses the highest 35 years of earnings, subject to each year's maximum covered (and therefore taxed) amount. For a discussion of how benefits are calculated, see Section 702.2 in Chapter 7 of my book. So retirees with maximum earnings all along will have higher covered earning in the last years, because the maximum amount of earning subject to SS "contributions" (i.e. taxes) keeps rising in a rather frantic attempt to extract revenues to pay benefits. For example, the 2008 maximum for covered earnings is $102,000. 35 years ago in 1973 the maximum was $10,800. In 2003 when you retired, the maximum was $87,000. So taxes for maximum earners in 2008 are 17% higher than they were just 5 years ago in 2003, without raising the rates, just the covered amount. So overall, over 35 years of earnings, later retirees have higher average monthly earnings (from which benefits are calculated) and have also paid more in "contributions" to the system. So it's not as unfair as it seems just by comparing benefit amounts.

Sunday, March 9, 2008

Withdrawal of Application- Pay Back Money

I just found out about "withdrawal of application". I can envision taking retirement benefits for a couple of years -- deciding it was a mistake and wanting to opt out of the system -- but being unable it immediately pay back what I got. Do you think S.S. will allow a retiree to withdraw but wait for them to pay back what they already got later -- their future reapplication conditional on paying back first, or having that amount deducted from benefits until it is paid? I can see the unwanted complications of requiring full delayed payment before taking reapplication -- some people would end up without benefits.
Drew from Chicago

SSA requires that all benefits be paid back immediately if a beneficiary withdraws an application. They will not allow installments. The best they will do is allow an offset against benefits payable on a new application, but only if the repayment can be recovered from any retroactive benefits and the first monthly check.

Getting SS Credits for Benefit by Federal Retiree

Question Follow Up by Nanette:
Thank you for the information on your blog to my question. I don't think this exemption applies in my case as I retired on an early out due to down-sizing in 1997. If I work for several additional years to earn the quarters I need, how would that affect my social security/pension?
Nanette from Penn.


The amount of your social security benefits will likely be limited by the Windfall Elimination Provision (WEP). This is designed to reduce the benefit amount for government pensioners who become eligible for a SS retirement benefit due to second-job employment. The computation of the regular ss benefit is weighted to advantage lower income workers. The calculation provides for a decreasing sliding scale percentage of worklife earnings. See Section Chapter 7, Sect. 702.2 of the Social Security Benefits Handbook, online edition at for a discussion of how benefits are calculated.

The WEP reduces the percentage for the first level of average wages from 90% to 40%. After that the percentages are the same. This will significantly reduce your SS retirement benefit because your average monthly SS covered earnings will be low. There are exemptions from the WEP for those who have at least 21 calendar years of substantial earnings in each year, but from what you have said, you will not be eligible for this exemption.

Note that to get the needed credits, called Quarters of Coverage (QCs), you need not work year-round. You will receive one QC in a given year for each increment of the annual amount required in that year. For example, in 2008, you need to earn $1,050 to get credit for one quarter. If you earn $4,200 in 2008, even if you earn it in just one calendar quarter, you will receive 4 QCs. But you cannot use the credit for a future quarter until the first day the quarter "arrives," so to speak. As you probably know, you need another 13 QCs on top of the 27 you already have.

Friday, March 7, 2008

Wife's Government Pension Offset

I have been trying to find out what benefit, if any, I would be entitled to since I worked for the Federal Government and did not have SS taken out. I only have 27 credits and I do not plan on returning to work. My husband will be 62 in August and I will be 61 March 14th of this year. He is going to apply for Social Security prior to his 62nd birthday so I need to know this information. May I file for insurance when I turn 62, on my husband's claim? We have been married 42 years, to each other. That in itself is a achievement....
Thank You,
Nanette from Penn.

42 years of matrimony certainly is a wonderful achievment! Congratulations!

You may collect on your husband's account as his wife, but if you receive a pension from your non-covered government service, then 2/3 of your pension amount will be deducted from your SS wife's benefit. This is called the GPO-- government pension offset. But if your 27 credits, by which I assume you mean quarters of coverage, was in federal employment, and you worked at the last 60 months in covered government service, you may be exempt from the GPO. See the link for the SS rule on this "Last 60 Month Exemption." Use your browser back button to return to this blog.

Tuesday, March 4, 2008

Divorced Wife

First of all I would like to thank you for your infomation [at]. It was very informative. My ex-husband is getting ready to retire. We were married for 8 years, and divorced in Cinn. Ohio in 1984. I am now 56 years old I want to know If I am entitled to any benifits for the 8 years we were married we file joint returns . Thanks
Juanita from Indianapolis

Sorry Juanita, but to collect as a divorced spouse your marriage must have lasted at least 10 years.

Monday, March 3, 2008

Surviving Divorced Wife


Someone told me the other day that if my husband dies his first wife is entitled to his social security. Is this correct? Thank you.

~Jill from MT


Yes, if they were married for at least 10 years. The ex can receive a benefit as a "surviving divorced wife ," to use the SSA term. She must be at least age 60, or age 50 if she's disabled. She can also collect on his account while your husnband is alive as a divorced wife at age 62.

But don't worry, this will have no effect on the benefit amount for any other beneficiary (including you).

Sunday, February 24, 2008

Stock Options


I have stock options that were awarded while I was still working. I am retired now and drawing social security but am not yet at full retirement age. I would like to exercise these options but am concerned over whether they will count toward the earnings limit. The handbook indicates options are considered as wages "at the time of payment". Is this when they were awarded or when they were exercised?
Charles from Texas

The fair market value of stock options when granted is counted as wages at that time. If the options are exercised, then the increase in value is wages when exercised. However, if this exercise occurs after retirement, the "wage" is attributed to the last day of employment for purposes of the earnings limit test, so it will not be counted against you if received after the year you retired.

Dual Entitlement-- Spouse Benefit & Retirement Benefit


Mr. Tomkiel,
I bought your book. Thanks for writing it. I'm nearing retirement and trying to figure out SS planning. Excepting your book, I cannot believe how little clear and accurate info there is about how SS works. Especially from SSA.
I have one question:
In Sec 302 you say: "The general rules are: 1) you must file on your own account if you have enough quarters ..; and 2) you must file on your spouses account as a wife or husband if your spouse is then entitled to benefits and. " This appears to say you must do both. My question is: is it really correct that you cannot file for spousal benefits without filing on you own work record at the same time?
My wife will file for her benefits at 66/FRA, I plan to wait until age 70. Can I file for and receive spousal benefits on her account starting at my FRA, while I wait until age 70 to file on mine to get the maximum monthly amount? Any downside to this?
I have seen on a couple of SS discussion boards that people are doing exactly that. Are they really? There must be a catch.
Bill from California

While the general rule is that a spouse filing for benefits is "deemed" to file on his or her own account as well, an exception exists where the claimant is over FRA (Full Retirement Age). As long as the benefits are not reduced for age, you may file on your spouse's account and defer entitlement on your own account by restricting the application. Thank you Bill for bringing this to my attention. I have included this exception in my Social Security Benefits Handbook, Online Edition in Section 302.

Your plan will work because you won't apply until you are at FRA. However, you may want to re-think this strategy. The only reason to defer benefits on your own account would be to get the Delayed Retirement Credits (DRC's) which would add 32% to your primary insurance amount if you waited to age 70 to file on your own account. But if your own benefit at FRA is greater than the husband's benefit, which is most likely, then you are paying for this advantage by losing the differntial for 48 months. You must calculate how long it will take to recover those benefits with the DRC credit.

Let's run an example. For the sake of discussion let's say your wife's PIA (primary insurance amount) is $1,500. You would collect an unreduced husband's benefit of $750 for 48 months ($36,000). Your own PIA is $2,000. So you forego your own benefit. You lose the difference: $1,250 a month ($60,000). This is a high price to pay. So what is the DRC advantage? 32% of your PIA, or $640 a month more beginning at age 70. So you paid $60,000 to get $640 a month. It will take 94 months to make it back, or 7 years, 10 months after age 70. So if you are pretty sure you will live past 78, your plan will show an advantage, not considering the interest you lose on the $60,000. And if you should die before reaching 70, you lose all the benefits that would have been paid on your own account.

An alternate plan might be to take your own benefit, but bank the difference if you have the discipline. If you die your estate will get what was received (if you deferred your own benefit your estate would lose out). If you live to 70, you could invest the $60,000 in an annuity that may pay more than $640 month to make up for the loss of the full DRC.

Each couple must consider the specifics of their situation. What are their respective PIA's, what is the state of health and life expectancy of each, how risk-averse or tolerant they are, how disciplined to save, how much would an annuity pay, and what their retirement needs are.

Divorce & Children's Benefits

If a disabled parent is receiving monthly checks for minor children and they become divorced and the children remain with the other parent, do the children still receive the monthly benefit or does it stop? What if the Court orders it to be paid to the custodial parent--is that possible?-- Charlotte from Florida

ANSWER: The children's benefits continue. The custodial parent will most likely be the Representative Payee for their social security benefits. The state court will not be able to order the federal agency who to pay, but the SSA will pay the parent who the court orders to have custody.

Sunday, February 3, 2008

Workers Comp Medicare Set-Aside

Question from William from North Carolina:

I am on total disabilaty from an injury on the job. My company was required to set up an annuity to pay for future medical expences for my injury. I was told I had to keep records of all expenses the money was spent on and file a report every year. Where could I find this information and forms on the internet? IF you have the information I would real like it sent to me so I want have any problems with Social Secuity.


When a WC claimant who is entitled to Medicare settles his WC case, the amount allocated to future medical bills must be set aside in a fund to pay such expenses so Medicare does not have to pay expenses that should be paid by the WC insurance company. When a fund is set aside at time of the WC settlement an administrator is appointed to use the funds for payment of medical bills related to the comp injury. The claimant or the treating doctor/medical provider normally will submit bills to the administrator who then pays them. Only when the fund is exhausted will Medicare cover any further expenses related to the job injury. The law requires an annual accounting to Medicare. Usually the administrator of the fund files the required reports. If your set-aside is self administered then you must pay the bills and file a statement when the fund is exhausted.

You should be able to get forms and more information from:
c/o Coordination of Benefits Contractor
P.O. Box 33849
Detroit, MI 48232-5849

Sorry- I can't find any on-line way to get the forms. You should also speak to your lawyer who handled your comp case for more help with this.

Stanley A. Tomkiel, III

2-Q's--Withdrawal of Application & Medicare Premium Surcharge

Questions from Stephen:

I just have 2 questions I would like for you to address.
Question No.1 -- Fred can wait until age 66 to take full benefits. Instead, he elects reduced benefits at age 62. 100% of those monthly receipts will be accumulated in a savings account. Then at age 66, if Fred survives, they will be repaid, without interest, and then the new benefit at 100% will begin. I asked the SSA if this works. They responded "If you have begun to receive Social Security retirement benefits and decide to stop your benefits, submit Form SSA-521, Request for Withdrawal of Application" . Clearly then, a taxpayer can withdraw and reinstate. And, ignoring the possible adverse tax consequences, it seems like a decision that makes total sense. I just find it a little hard to believe because it violates my "free lunch" rule. If there are no bad tax consequences, then effectively the recipient gets an interest-free loan which can be repaid , or not repaid. And if repaid, 100% of benefits begin at age 66.It would of course be tragic to assume lower benefits can become higher benefits if, for some reason, that option were not available.

Question No. 2 -- Assume Fred has normalized annual income that would not cause the premium surcharge for Medicare premiums to be invoked. But, in 2005 there is a land sale that causes income to balloon, which in turn triggers the surcharge. It's a one-time only event.My understanding is that the SSA has procedures for re-evaluating premiums that result from extraordinary events. I have their "Request for Reconsideration" Form, but it leaves much to be desired. So, my questions is... do seniors who have one-time bumps in income get relief ? Or do they face having the surcharge for, I assume, a 12-month period.



Question 1-- In reviewing the POMS and Regulations for withdrawal of applications, I cannot find any provision that requires interest to be added to the benefits being refunded. However, giving back all that principal of 47 months of benefits means that you will be losing the interest from the capital once you give it back, not to mention the capital itself. Is it really worth giving back $70,000 in capital to get an extra $500 a month (assuming as an example you get a reduced benefit of $1500 vs. an unreduced benefit of $2000)? The break-even point would be over 11 years. So yes, your strategy would get you interest if you didn't touch the benefits before 66, but why not keep the money in the bank. If you die before 77 you will have lost any advantage, as well as the use of the money that you may very well like to put to use. SSA has a great calculator to figure the break-even age for deciding whether to take benefits earlier or later.

If you decide to follow this stategy make sure that when you withdraw the retirement benefits application you restrict the withdrawal so that you do NOT withdraw your Medicare entiltlement. Otherwise you will have to pay back all Medicare benefits received.

Question 2-- You are talking about the the new Medicare Part B premium rules that started in 2007. Under this new law, Part B premiums are increased for people earning over certain thresholds in the year 2 years before the applicable year. They are re-calculated from year to year. One time bumps in income will result in the higher Part B premium. The exceptions you are referring to apply when there has been a life-changing event that causes a lower income in a later year. The rule allows for 7 kinds of these events, which the government refers to as LCE's (Life-Changing Events- am the only one who gets the chills hearing this acronym?) So your friend's premiums for 2007 are based on his 2005 income, unless due to a Life-Changing Event his 2006 income dropped.

The 7 events are:

Death of Spouse (HI 01120.010)
Marriage (HI 01120.015)
Divorce or annulment (HI 01120.020)
Work Reduction (HI 01120.025)
Work Stoppage (HI 01120.030)
Reduction in income due to loss of income-producing property (HI 01120.035)
Reduction in or loss of certain forms of pension income (HI 01120.040).

The links are to SSA's Programs Operations Manual Systems- the so-called POMS.

Stanley A. Tomkiel, III

Thursday, January 10, 2008

Wife's Benefits on Own Account & Mine

Question from Tom fromTexas

Terrific SS Book!
I have some questions...
Background... I am 59. At 62 I am eligible for $1600/mo, at 66, $2000. My spouse is 61. At 62 she is eligible for $150/mo, at 66, $200.
Obviously it is to our advantage for her to draw the 1/2 of mine.
Here are the questions.
1. Can she draw my reduced half when she turns 62 ( I will be 60)? or does she have to wait on my half until I am eligible at 62?
2. If she draws half of mine and I don't draw anything until I am 66, does she then get a boost up to the full amount I am eligible for at 66?
Thanks Tom for the kind comment about my book ( ). No your wife cannot collect on your account until you become eligible for benefits. She can collect on her own account and then when you become eligible she can collect the excess Wife's benefit on top of her own. The wife's benefit is figured by taking 1/2 of your unreduced benefit (the primary insurance amount-in your case $2,000), subtracting her own primary insurance amount (in her case $200) , not her reduced benefit amount. So her unreduced Wife's benefit would be $800, and then if she is under Full Retirement Age at that time, the wife's benefit is reduced based on the wife's age reduction factor. The wife's reduction factor is greater than the the regular retirement age reduction factor. The reduced wife's benefit is then added to the reduced retirement benefit (her own account) for the total benefit amount. I hope this is helpful.