Question:
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

Answer:
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.

Withdrawal of Application- Pay Back Money

Question:
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

Answer:
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.



Answer:

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 SocialSecurityBenefitsHandbook.com 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.

Wife's Government Pension Offset

QUESTION:
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.

ANSWER:
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.

Divorced Wife

Question:
First of all I would like to thank you for your infomation [at SocialSecurityBenefitsHandbook.com]. 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

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

Surviving Divorced Wife

QUESTION:

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



ANSWER:

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).