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Social Security

Q&A: How “deeming” works for Social Security spousal benefits

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Dear Liz: I will be turning 64 next year and my wife will be turning 62. I plan to wait as long as I can to file for my Social Security, hopefully till 70. My benefit at full retirement age (age 67) is around $3,400 monthly and my wife’s is about $1,100. Half of my benefit will always be higher than hers, even if she waits until age 70 to file. Can she file for early benefits next year (around $800 a month), then switch over to half of mine when I finally file? Will the ‘deeming’ rule affect this? Will she actually get half of mine if she files early?

Answer: If you had already started receiving your benefits, your wife would be “deemed” to be applying for both her own benefit and her spousal benefit and would be given the larger of the two. She couldn’t apply for just one, and there would be no switching later.

Because you haven’t started yet, though, the spousal benefit hasn’t been triggered. The only benefit she can currently apply for is her own. When you apply, the spousal benefit will become available and she will be switched to that if it’s larger (which sounds like it will be the case).

Spousal benefits can be up to half of what the primary earner would get at full retirement age, but the amount is reduced when started early. If you apply for benefits before she reaches full retirement age, in other words, her spousal benefit would be less than 50%.

Plus, any benefit started before the applicant’s full retirement age is subject to the earnings test, as described above.

Because so many different factors are at play, it could make sense to use one of the paid Social Security claiming strategy sites such as Social Security Solutions or Maximize My Social Security.

Q&A: How should I receive Social Security survivor benefits?

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Dear Liz: I am 68 and still working. I plan to wait until age 70 to maximize my benefit before taking Social Security. My spouse (born in 1956) passed away in 2018 after just beginning to draw her Social Security benefits at age 62.

Even though I was the higher earner, I believe that I can draw survivor benefits now from my wife’s Social Security if I apply. I also believe that I can switch to my own benefit when I turn 70, and my benefit would then be higher.

But I cannot find an answer to whether, if I did such a switch at age 70, my benefits would be at maximum because I waited until age 70, or would be less than the maximum because I started taking my wife’s survivor benefits or even worse, because my wife started benefits early. I see many articles that dance all around this question but never answer it. Can you please be the one who answers this question?

Answer: Social Security can be incredibly complex, with different rules applying depending on age, marital status and the type of benefit involved. Survivor benefits have different rules than spousal benefits, for example, and both work differently from the retirement benefit people earn on their own work record. You’re smart to want to understand exactly how the rules affect your individual situation before applying.

You are correct that you can apply for survivor benefits now and then switch to your own retirement benefit when it maxes out at age 70. Your retirement benefit will not be reduced because you collected survivor benefits first, or because your wife started her benefit early.

However, your survivor’s benefit will be smaller than it might have been because of her early start. The survivor benefit is determined by what the deceased spouse was receiving at the time of death.

Survivor benefits can begin as early as age 60, or 50 if the survivor is disabled, or at any age if the survivor cares for minor or disabled children from the marriage.

But starting early would have further reduced your benefit, plus you would have been subject to the earnings test, which withholds $1 for every $2 you earn over a certain limit (which in 2025 is $23,400). The earnings test goes away when you reach full retirement age, which for someone born in 1957 is 66 years and 6 months.

There was no benefit to delaying your application past your full retirement age. That means you’ve missed out on several months of survivor benefits you could have been receiving. You can get six months of back benefits when you apply, but that’s the limit.

Q&A: I’m 59 with no retirement savings. What now?

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Dear Liz: I’m 59. In 8 years, I will qualify for an average Social Security income. I have no retirement saved and am not a homeowner but I have been blessed with a modest inheritance. What financial advice would you give in this situation?

Answer: The most powerful action you can take for your future retirement is to delay your Social Security application as long as possible, preferably waiting to apply until your benefit maxes out at age 70.

Each year you delay after your full retirement age of 67 will add 8% to your checks — a guaranteed return that can’t be matched anywhere else. You also don’t have to worry about missing out on inflation adjustments, since those are added into your benefit starting at age 62 whether or not you’ve applied.

Applying early stunts your benefit for life. The longer you live, the more likely you are to run through your other savings, so a maximized Social Security benefit is the ultimate longevity insurance.

If you’re married and the higher earner, your benefit also determines what the survivor will get after the first spouse dies.

Other smart moves would be to start saving what you can for retirement and get your inheritance invested properly, so that your money continues to grow. Consult a fee-only financial planner or an accredited financial counselor for help.

Q&A: How spousal benefits work

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Dear Liz: My best friend was able to get a 50% bump in his Social Security monthly benefit due to his wife having a higher monthly benefit. My wife didn’t work enough to qualify for Social Security, but I did. Can she get the spousal benefit from my record?

Answer: Your wife can qualify for an amount that’s up to half of your benefit at full retirement age, provided you’ve already applied for Social Security. The amount she gets would be reduced if she applies before her own full retirement age, which is 67 for anyone born in 1960 or later.

You mentioned your friend getting a 50% “bump” in his benefit, but that’s not how spousal benefits work. Your friend’s spousal benefit was compared to the benefit he earned on his own work record, and he would get the larger of the two amounts – not both.

Q&A: Should I cash out my pension to pay off my home?

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Dear Liz: I was recently and unexpectedly laid off. Money will be tight on Social Security alone. If I take the lump sum of my pension, the amount would be almost enough to pay off my home. Should I do that?

Answer: Pension payments typically continue for life and you can’t lose the money to fraud, bad investments or stock market downturns. If you had plenty of other assets and the pension was small, you might be fine cashing it out. Under the circumstances, though, consider hanging on to this valuable asset.

In general, you should be extremely wary about tying up a large sum in any one investment. That includes paying off a mortgage. You won’t have monthly loan payments anymore but you may have trouble accessing that cash again in an emergency.

Also be cautious about taking Social Security too early. Your benefits will be permanently reduced, which can have a huge effect on your future quality of life. While finding another full-time job can be extremely tough late in life, even a part-time job might be enough to help you delay filing.

You could benefit enormously from individualized financial advice. Consider reaching out to free or low-cost services, such as Advisers Give Back.

Q&A: Why Social Security imposes an earnings test

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Dear Liz: I am under full retirement age, collecting Social Security and working part-time. I just received a letter from Social Security telling me I earned over the $22,320 limit and now have to pay back some of my Social Security. I was aware of the limit, so the letter was not unexpected. What I’m curious about though is what is the rationale behind the earnings limit? Once you’re eligible for Social Security, why do they care how much you earn? Are they trying to discourage applying before full retirement age? Also, and more importantly, I think I read that somewhere down the line, I will get back what I had to pay back. Can you clarify that for me?

Answer: Social Security was designed as insurance for those who could no longer work, and a retirement earnings test has been a part of the system from its creation in 1935. Back then, the test was all-or-nothing: Any earned income would preclude your getting a benefit.

Over time, the test was modified so that people could earn some income without losing all their benefits. The age at which the earnings test no longer applies has changed as well. In the 1950s, it was set at 75. In the 1960s, the age was lowered to 65. In the 1980s, it was adjusted so that the current “full retirement age,” when the test no longer applies, is 67.

The current test withholds $1 for every $2 earned over a certain limit, which in 2025 is $23,400. Once you reach full retirement age, the withheld amounts will be added back into your benefit.

What you won’t get back, however, is the larger benefit you could have earned by delaying your initial application. Most people are better off waiting at least until full retirement age to collect Social Security, if they possibly can.