Today’s column addresses questions about how not paying US taxes can affect Social Security benefits, divorced spousal benefits before retirement benefits, whether taking retirement benefits four months early was a mistake, spousal benefits and moving abroad. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc, which markets Maximize My Social Security and MaxiFi Planner.
See more Ask Larry answers here.
Have Social Security questions of your own you’d like answered? Ask Larry about Social Security here.
How Will Not Paying US Taxes For The Next 10 Years Affect My Social Security Benefits?
Hi Larry, I have 25 years of income that I paid Social Security taxes on but a few years ago I moved to Mexico for a higher paying job. I file my taxes every year but get an exemption for living abroad and so I’m not now paying Social Security taxes on my income. I could stay here as long as 10 years. How will this affect my Social Security benefits? Thanks, Chris
Hi Chris, Your Social Security retirement benefit rate will be based on an average of your highest 35 years of wage-indexed earnings you paid Social Security taxes on. If you only have 25 years of Social Security earnings, then 10 zero earnings years would be included in your average, which would of course drag down the average and your resulting benefit rate. Replacing those years with years of positive income you’d pay Social Security taxes on would increase your benefit, but not doing so will not decrease it.
You may want to consider using one of my company’s programs — Maximize My Social Security or MaxiFi Planner — to calculate your approximate benefit rate with and without future earnings. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry
When I Turn 62, Can I Receive Divorced Spousal Benefits And Then Collect My Own Benefits At 70?
Hi Larry, I am 55 and divorced and have not remarried. I was married for to my ex-wife for 12 years. She is 5 years older than me. I make significantly more than her and have maximized my Social Security amounts. When I turn 62, is it possible for me to file and receive spousal benefits and then collect under my own when I turn 70? Thanks, Ross
Hi Ross, Since you were born after 1/1/1954, you could never file just for spousal benefits without filing for your own Social Security retirement benefits at the same time. This is due to the Bipartisan Budget Act of 2015. Before that, it would have been possible to file according to the strategy you describe but it is no longer possible for you and others born after the deadline. Best, Larry
Did I Make A Mistake By Starting My Benefits Four Months Prior To FRA?
Hi Larry, I filed for my Social Security retirement benefits in 1/2018 at 65 and turned 66, my full retirement age, in 4/2018. My income was considerably lower than my husband’s, who is six months younger and is also retired. He is currently drawing his spousal benefit, having filed for it when he reached his full retirement age, and delaying his retirement benefit until 70. Did I make a mistake by drawing my retirement benefit those four months early if he should die before me? Would I still be able to receive his larger benefit because he delayed? Thanks, Molly
Hi Molly, It wasn’t necessarily a mistake for you to claim your benefits early. You will retain a reduction in your benefit rate for as long as both you and your husband are living, though, even if you later qualify for additional spousal benefits when your husband starts drawing his own Social Security benefits.
However, assuming that your husband’s benefit rate is higher than yours, the fact that you started drawing your benefits prior to your full retirement age (FRA) would not reduce your survivor rate that you would receive if your husband dies before you. Your survivor rate would include any delayed retirement credits that your husband earns by waiting to claim his benefits. So if he lives at least until 70 and he waits until then to claim his retirement benefits, you would receive his full age 70 rate as a survivor. You couldn’t receive that full amount plus your own benefit rate, though, just the higher of the two. Best, Larry
Am I Eligible To Draw A Spousal Benefit When My Husband Files?
Hi Larry, I was born in 8/1955 and my husband was born in 7/1955. My husband retired in 4/2009 and has been receiving a retirement benefit since that time. I have continued working all these years and want to retire later in 2020. Neither have started taking our Social Security retirement benefits. Am I eligible to draw a spousal benefit from my husband once he takes his retirement benefit next year? Thanks, Betsy
Hi Betsy, Since you were born after 1/1/1954, you couldn’t file just for a spousal benefit without also filing for your own benefits at the same time. Therefore, the only way that you could qualify for any spousal benefits is if your husband’s primary insurance amount (PIA) is more than twice as much as your PIA. A person’s PIA is equal to their Social Security retirement benefit rate if they start drawing at full retirement age (FRA). Best, Larry
Will Social Security Pay My Husband’s Benefits If We Move To Germany?
Hi Larry, My husband who will be 65 this month and receives the equivalent of Social Security disability from Germany. We have always reported this as income, even though in Germany it is not taxable because it is small. He is eligible to get an even smaller Social Security benefit from the US. Will they pay if we move back to Germany? He is now a legal resident in the US. Thanks, Jen
Hi Jen, Assuming that your husband is a German citizen and you move to Germany, then yes he could still be paid any U.S. Social Security benefits for which he is eligible. Best, Larry
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