Ask Liz Weston

Get smart with your money

Social Security

Q&A: Should I draw down my 401(k) before accepting Social Security?

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Dear Liz: I am a 66-year-old single male working part-time (not by choice, but it’s the best I can get). I earn about $24,000 per year plus another $4,000 in unemployment during the summer. Work provides healthcare, so I don’t have Medicare premiums yet. With fixed expenses at roughly $50,000 per year, I am withdrawing from my 401(k) to cover the gap until I reach full retirement at the age of 70. If they will let me, I hope to continue to work until 75 because I love my job. At this rate, I will have exhausted the 401(k) by age 70, leaving me with a $100,000 CD earning 4%. Am I right to use the 401(k) as a bridge to full Social Security?

Answer: The advantages of delaying Social Security are typically so great that financial planners often recommend tapping other resources, including retirement funds, if that allows you to put off your application. Social Security’s delayed retirement credits boost your payment by 8% each year between your full retirement age and age 70, when benefits max out. A maxed-out payment is a powerful hedge against longevity risk, which is the danger of living so long that you deplete your savings.

However, a financial planner probably would suggest you also look for ways to decrease your living expenses to avoid completely exhausting your retirement accounts. As you’ve discovered, older people can have a harder time staying employed, even when their health cooperates. You may not be able to work as long as you’d like, and the average Social Security check is closer to $2,000 than the $4,000 or more you would need to meet your fixed expenses.

Consider seeking out a fiduciary financial advisor who can review your situation and offer personalized advice. Your employer or 401(k) provider may offer access to such advisors, or you can look for a financial coach or accredited financial counselor affiliated with the Assn. for Financial Counseling & Planning Education at www.afcpe.org.

Q&A: Could spouse’s early start stunt Social Security survivor benefit?

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Dear Liz: My husband and I plan to delay taking Social Security retirement benefits until the higher-earning spouse is 70. This is to ensure the highest possible survivor benefit. However, the lower-earning spouse will be turning 62 at the same time that the higher earning spouse turns 70. We are concerned that the lower-earning spouse’s future survivor benefit will be reduced if the lower earner starts benefits early. When would be the best time for the lower-earning spouse to take retirement benefits and ensure that the survivor’s benefit remains the same?

Answer: The lower earner won’t reduce the survivor benefit by starting early, but they will permanently reduce their own benefit or any spousal benefit they’re owed. Most people are better off waiting at least until their full retirement age to start Social Security benefits so they can avoid this reduction.

Q&A: How are you taxed if you work abroad?

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Dear Liz: It has become difficult to find good employment in my field. I’ve been able to find several openings that sound exactly like what I want outside the U.S. If I successfully apply for a position in a foreign country, it could mean paying income taxes into both the U.S. system and the foreign country. Not being a citizen of that country may also limit possible future employment opportunities. Once employed and resident in that county for the required time, I could apply for citizenship and pay the fee to renounce U.S. citizenship.

Obviously, this step would come with significant financial implications, including no longer being able to receive Social Security (into which I have paid during my U.S. employment). My banking and investment accounts would have to be completely rearranged as well. Obviously, a large number of people emigrate and change their citizenship every year, but how does one navigate all this financially?

Answer: You’ve come to some interesting but likely erroneous conclusions about working abroad.

Let’s start with taxes. The U.S. tax code has a few provisions designed to help people working abroad avoid double taxation, including the foreign earned income exclusion (which is up to $132,900 in 2026) and the foreign tax credit. You will still be required to file annual tax returns with the IRS reporting your worldwide income, but much if not all of your earnings abroad could avoid U.S. taxes.

Next, let’s discuss citizenship. About half the countries in the world, including the U.S., allow dual citizenship. If the country where you want to work does not, and you decide to renounce your U.S. citizenship, you still have a right to the Social Security benefits you’ve earned in America.

Keep in mind, though, that renunciation is considered permanent. If you changed your mind later, you would have to try to get a U.S. visa and go through all the steps to be naturalized, which can be a long process.

As far as your financial accounts, they can stay as they are as long as you maintain U.S. citizenship. You’ll likely need to set up bank and perhaps other financial accounts in the new country as well. Consider reading “Borderless Living: How to Create Freedom and Financial Security for Americans Abroad” by financial planner Brian Dunhill.

Q&A: Should I name a representative payee in advance?

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Dear Liz: My question has to do with a bulletin put out by the Social Security Administration last year requiring people with Social Security income to submit the name of a person to be their advanced designation representative. It also said that you need to submit a name for your ADR annually. Many people probably don’t know about this. But can you clarify? Is it just a preliminary or mandatory requirement? If mandatory then what are the consequences if you don’t designate someone?

Answer: When someone is a minor, incapacitated or otherwise unable to manage their own Social Security benefits, the Social Security Administration names a representative payee to handle the funds.

The voluntary Advanced Designation of Representative Payee program allows you to nominate people you trust to perform this role should you become incapacitated. You can choose up to three people as possible representative payees. You can change your nominations at any time and Social Security will ask you to review your choices annually to make sure you’re still comfortable with them (because, as we know, situations and people’s capacities can change over time).

If you do opt into the advanced designation program, your nominees won’t be a shoo-in. Social Security will prioritize your choices, but will still conduct a full evaluation to ensure they can handle the job.

Q&A: You can pause Social Security payments

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Dear Liz: Are you allowed to stop your Social Security payments if you choose to make over the $23,000 limit?

Answer: When you start Social Security before your full retirement age, you’ll face the earnings test that reduces your benefit by $1 for every $2 you make over a certain limit, which in 2026 is $24,480.

You can suspend your Social Security payments once you reach your full retirement age. At that point, however, the earnings test will no longer apply.

The money you lost to the earnings test isn’t gone forever. The amounts that were withheld will be added back to your benefit over time. What you have lost is the increase in your benefit that would have occurred had you delayed your application until full retirement age.

You still have one last chance to benefit from delay, however. If you opt to suspend your benefit at full retirement age, you can get delayed retirement credits that will boost your check by 8% for each year between your full retirement age and age 70. For most people, that 24% boost plus accrued cost-of-living increases will be well worth the wait.

Q&A: Early Social Security start doesn’t affect survivor benefits

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Dear Liz: I started collecting my Social Security at age 62 because I had cancer and could not work. My husband is now ill and will pass on soon. Will I still be able to get my husband’s Social Security, which is much higher than mine, when he passes on?

Answer: Yes. Surviving spouses get the larger of a couple’s two Social Security checks. You’ll no longer be able to collect your own benefit.