Ask Liz Weston

Get smart with your money

Social Security

Q&A: Starting Social Security too early

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Dear Liz: Does the Social Security Administration still allow a person to start taking Social Security benefits at age 62 and then later return the full amount received and begin taking the higher delayed benefits? For people who don’t need the income, this seems like a smart strategy as they could obtain the investment income on the benefits received from age 62 to 70 as well as the higher benefits amount starting at age 70.

Answer: Social Security closed that particular loophole in 2010.

As you know, Social Security retirement benefits increase each year you put off applying between age 62 and age 70, when benefits max out. An early start typically means a permanently reduced benefit.

Before 2010, people who started early, but who were able to repay all the money they received, were allowed to restart benefits at an older age and claim the larger checks as if they’d never applied before. This do-over prompted some recipients to apply early, invest the money and enjoy a kind of interest-free loan from the government.

People who make the mistake of starting Social Security too early still have a couple of options. They can withdraw their application for benefits within 12 months, but they are required to repay any benefits received, including benefits received by family members such as spousal or child benefits.

Another option is to wait until their full retirement age, which is currently between 66 and 67, and simply suspend their benefit.

No money has to be paid back and the recipient receives the delayed retirement credits that increase their benefits by 8% for each year they delay. Benefits will be automatically restarted at age 70, although the recipient can start them earlier, if desired.

Q&A: Waiting to collect Social Security

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Dear Liz: I understand your suggestion about waiting until you are 70 to apply for Social Security because you’ll get a larger amount. However, I applied at 62 and no matter how much more I would have received at 70, I would never recoup an amount equal to what I received. My husband chose to wait and died before he reached 70.

Answer: If your husband’s benefit was larger than your own, then his decision to delay was a real gift to you.

When one member of a couple dies, the survivor gets only the larger of the two Social Security benefits the couple used to receive. Losing one benefit can cause a sharp drop in the survivor’s income. That’s among the reasons why financial planners urge the higher earner to wait as long as possible: to maximize the benefit the survivor will have to live on for years or even decades.

If your husband had remained alive, then your early start could have been a mistake. Most people live past the “break even” point where the larger checks you could get from delaying more than outweighed the smaller checks you passed up in the meantime.

Q&A: A widow’s Social Security earnings problem

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Dear Liz: My dear friend lost her husband a few years ago. The husband did something wrong with working and collecting Social Security, so they are now withholding her $2,000 monthly Social Security check, which is devastating to her. Can she be punished for what he did unbeknownst to her? She is stuck and doesn’t know what to do.

Answer: People who start Social Security before full retirement age face the earnings test, which reduces benefits by $1 for every $2 earned over a certain amount (in 2022, the amount is $19,560).

It sounds as though the husband didn’t properly notify Social Security about his earnings and the overpayment wasn’t discovered until after his death. Whenever Social Security is unable to recover an overpayment from someone, the agency can collect from anyone else receiving benefits on that person’s earnings record, said William Meyer, founder of Social Security Solutions, a benefits claiming site.

The letter notifying her about the overpayment would have included a section about her appeal rights. If the earnings information was incorrect, for example, she would have 60 days to appeal and supply the correct amount of his earnings.

She also can call the agency’s toll-free number, (800) 772-1213, and request that less be taken from each check. As long as the total owed is paid off within 36 months, the agency will comply, Meyer says. If she can’t afford to have the overpayment repaid within 36 months, she can request longer but she’ll have to provide proof of her income, resources and expenses, he said.

If she’s in dire straits and can’t afford to pay any of the money back — in other words, if she can’t meet her “ordinary and necessary living expenses” — she should submit an SSA-632, “Request for Waiver of Overpayment Recovery” form, Meyer said.

Q&A: Spousal benefits

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Dear Liz: My wife and I have been married for 18 months. I am 67, she is 66. She is not eligible to receive Social Security due to her work history. Is she eligible to receive spousal benefits now, even though I plan to wait until age 70 to receive mine?

Answer: Your wife can’t start spousal benefits until you begin receiving your own benefit. In the past, someone in your position could file a Social Security application and then immediately suspend it. That triggered the spousal benefit while allowing the primary earner’s benefit to continue growing. Congress changed those rules in 2015, however.

Q&A: Figuring taxes on Social Security

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Dear Liz: How will our Social Security payments be affected by any passive income such as from rental properties? We have two properties, which add $3,000 monthly to our current income. I plan on retiring at 72, which is six years away. My husband may retire earlier due to health problems. We will have savings as well as my 401(k) when I retire. Although my retirement income “pencils out,” I don’t know exactly what to expect from Social Security. How should I calculate my net income in retirement?

Answer: You could pay income taxes on up to 85% of your Social Security benefits if you have other taxable income. Examples of taxable income include wages, interest, dividends, capital gains, rent, royalties, annuities, pension payments and distributions from retirement accounts other than Roths.

To determine how much of your benefit is taxable, you would first calculate your “combined income,” which consists of your adjusted gross income plus any nontaxable interest you receive plus half of your Social Security benefits. If you file a joint return, you typically would have to pay income tax on up to half of your benefits if your combined income fell between $32,000 and $44,000. If your combined income was more than $44,000, up to 85% of your benefits would be taxable.

Q&A: Guard your Social Security number

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Dear Liz: You recently stated Social Security numbers were never intended to be used as a universal identifier. I’ve found that every place asking for my number has other means of identification and will ask for my mother’s maiden name or my place of birth when I tell them I don’t use my Social Security number for identification purposes. This also works for financial institutions that have a legitimate claim for having it.

Answer: To clarify, you probably had to disclose your Social Security number when you applied for accounts at your financial institutions. You also typically need to disclose it when you apply for credit, employment or government benefits.

But you don’t necessarily have to cough it up on demand to verify your identity or to do business with the many, many other companies and organizations that ask you for it without good reason to do so.