Ask Rusty: Will Taking My Benefit Early Affect My Widow Benefit?

DEAR RUSTY: My husband is 70 and has been taking Social Security for several years. His benefit is $2,100 per month. I am 60 and will turn 61 in March. I have very little built up and my expected SS benefit at my full retirement age is $1163 and $829 if I choose to take it at age 62. We are comfortable with our current income, but the benefit at 62 is enticing. I want to know how taking it at 62 would affect my situation if my husband predeceases me. Would I then be able to exchange my benefits for his? Please advise. Signed: Planning Ahead.

DEAR PLANNING: Taking your own SS benefit early (before your full retirement age) won’t affect the amount of your survivor benefit should your husband predecease you. The only thing that would affect your survivor benefit is the age at which you claim it. So yes, you could claim your own benefit first and then switch to your survivor benefit later without hurting your eventual survivor benefit. If you have reached your full retirement age (FRA) when your husband passes, your survivor benefit will be 100 percent of the amount your husband is receiving at his death, instead of your own smaller benefit. But if you take the survivor benefit before your FRA, it will be actuarially reduced according to the number of months prior to FRA it is claimed. To be clear, if your husband were to pass before you reached FRA, you have the option to wait until your FRA to claim the survivor benefit (so you can get 100 percent of his benefit). In other words, you could continue to collect your own benefit until your survivor benefit reached 100 percent at your FRA (a survivor benefit reaches maximum at FRA).

Be aware, though, that there is another consideration if you claim your own SS benefit before you reach your full retirement age. If you are still working and claim your benefit before your FRA, you’ll be subject to Social Security’s “earnings limit” which, if exceeded, will cause SS to take back future benefits equal to 50 percent of the amount you exceeded the limit by (the 2020 limit is $18,240, but it changes annually). If you have substantial earnings from working, that could mean you will go some number of months without benefits (depending upon your earnings level). In the year you reach your FRA (but prior to your FRA) the earnings limit goes up by 2.6 times and the penalty is less, and once you reach your FRA there is no longer an earnings limit. But, I want to make sure you’re aware that collecting early and exceeding the earnings limit will affect your benefits. If you go months without benefits because you exceeded the earnings limit, SS will give you time credit for those months when you reach your FRA, which will result in a small increase in your own SS benefit at that time.

But the bottom line is that collecting your own Social Security benefit early will not affect your eventual survivor benefit. Only the age at which you claim it, if earlier than your FRA, will affect the amount of your survivor benefit. And, by the way, your FRA as a widow is 4 months less than your normal FRA because SS takes 2 years off of your birth year to determine your “widow’s FRA.”

DEAR RUSTY: About a month or two ago I was notified that my Social Security was being reduced from $1,583 a month to about $1,283 a month – a $300 deduction! They said it was because my income was over the limit on my last return. I filed my taxes “married – filing separately” because my wife has her own income. If we had filed jointly, I would not have had the reduction. My question is why wasn’t this told to us when we filed our Income Tax last year instead of a last-minute thing? I am a 77-year old and a 100 percent disabled veteran, which probably has no effect on this, but wanted to add that information. Any light you can shed on the matter will be very much appreciated. Signed: Irritated Senior

DEAR IRRITATED SENIOR:

First, I want to thank you for your service to our country. Allow me to explain what I believe happened. Your net (not gross) Social Security benefit payment was probably reduced as a result of a rule known as “IRMAA” – the “Income Related Medicare Adjustment Amount.” This is a supplement added to your Medicare Part B premium as a result of higher income, and a higher Medicare premium would mean a lower net Social Security payment.

Although filing your taxes separate from your wife does mean a lower income reported to the IRS for you, it also reduces the clip levels at which the IRMAA rule kicks in. For those who file income tax as an individual, IRMAA applies if your “provisional” income from all sources, including IRA or 401(K) withdrawals and half of your SS benefits for the tax year, exceeds $87,000. For those who file taxes jointly as a married couple, IRMAA applies if your combined income is more than $174,000. Incomes above those clip levels result in corresponding higher IRMAA premiums, up to a maximum of $491.60 (for 2020). So apparently your income for your filing status exceeded one of the higher IRMAA clip levels, which resulted in your monthly Medicare Part B premium going from the standard $144.60 to an IRMAA premium about $300 higher. Note that if your income in a subsequent year falls below the IRMAA clip levels, your Medicare premium will also go down to the level appropriate for your more recent income level.

As far as why you weren’t told this in advance, neither Medicare nor the IRS (nor any other Government agency) will advise you in advance on such matters; the onus is upon you (and your tax preparer or financial advisor) to understand the implications of your income on your Medicare premium as well as your income tax obligation. You may want to speak to your tax advisor to see if there is a tax-filing option for eliminating the IRMAA. Once again, thank you for your service to our country, and I hope the above clarifies what happened to your Social Security benefit.

This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (amacfoundation.org/ programs/social-security-advisory) or email us at ssadvisor@amacfoundation.org.

Russell Gloor

Ask Rusty