Social Security

Q&A: The perils of procrastination can be huge where finances are concerned

December 28, 2020 By Liz Weston

Dear Liz: My husband was killed in 2016 and was self-employed for the last three years of his life. I hadn’t gotten around to filing his taxes until earlier this year in June. At first the Social Security rep told me we were approved for survivor benefits but within the hour changed her decision. She said that since it’s been more than three years, the IRS won’t report his credits to Social Security and that is what ultimately disqualifies my children and me. I’m so confused and feel like my stomach just dropped to the floor.

Answer: Understandably. This appears to be one of those awful cases where putting something off has profound, irreversible consequences.

Survivor benefits are monthly checks paid to a worker’s minor children, typically until they turn 18. Surviving spouses normally can start benefits at age 60, but they can start at any age if they’re caring for the worker’s minor children. In that case, the caretaking spouse qualifies for benefits until the youngest child turns 16.

Limits vary, but what a family can receive is generally equal to between 150% and 180% of the worker’s basic benefit. The average survivor benefit for children is more than $800 a month, and the average for a caretaking mother or father is over $900 a month.

No worker needs more than 40 credits, which requires 10 years of work, to qualify a family for survivor benefits. The number of credits varies by age, so younger people need fewer credits.

Even if your husband didn’t have the required number of credits for his age, survivor benefits could have been paid if he had worked for at least 18 months in the previous three years.

But there is a deadline for self-employed taxpayers to have their incomes counted toward Social Security credits, which they do by filing their federal tax returns. The deadline is three years, three months and 15 days after the end of the calendar year in which the income is earned, said economist and Social Security expert Laurence Kotlikoff of MaximizeMySocialSecurity.com.

The deadline for reporting your husband’s 2016 income passed in March, while the deadlines for his 2014 and 2015 income passed in March 2018 and March 2019, respectively.

Appeal the decision because it’s possible that your husband earned enough other credits to qualify your family for benefits even without his last few years of work. But steel yourself for the likelihood that you’ve lost thousands and perhaps tens of thousands of dollars of potential benefits.

Q&A: A young widow seeks help with Social Security survivor benefits

November 16, 2020 By Liz Weston

Dear Liz: My husband died at 30, making me a widow at 29. I did receive Social Security survivor benefits for our underage children, but what, if anything, am I entitled to as his wife? At the time of his death, we were living separately, although we were still legally married.

Answer: The earliest a widow or widower can get survivor benefits is typically age 60, unless they are disabled, when survivor benefits can begin at 50. Starting benefits before their own full retirement age of 66 to 67 means accepting a reduced payment, but widows and widowers have the option of switching to their own retirement benefit later. (Retirement benefits begin at a reduced amount at age 62 and reach their maximum at age 70.)

Like other Social Security benefits, survivor benefits also are subject to the earnings test if you start them before full retirement age. The earnings test reduces your benefit by $1 for every $2 you earn over a certain amount, which in 2020 is $18,240.

You mentioned receiving survivor benefits for your children, but you probably also received benefits then. A spouse caring for the children of a deceased worker is entitled to survivor benefits until the youngest of those children turns 16. (A child’s survivor benefits can continue until age 18, or 19 if the child is still in high school, or indefinitely if they are disabled and the disability began before age 22.) Each family member can receive up to 75% of the deceased worker’s benefit, but there’s a maximum any household can receive based on one worker’s earnings record. The limit varies but is generally 150% to 180% of the worker’s benefit.

If you had been divorced rather than separated when he died, you would still have been entitled to survivor benefits as the caretaker of underage children, no matter how long the marriage lasted. You would only receive regular survivor benefits at 60, however, if your marriage had lasted at least 10 years.

Q&A: Older parents and retirement: What about child benefits?

October 19, 2020 By Liz Weston

Dear Liz: I am trying to decide whether to take Social Security at my full retirement age (66 years and four months) or wait and take it at 70. I am 64 and have two children, 13 and 11. My older child could get the child benefit for 24 months while my younger one would receive it for 41 months. Currently I am scheduled to receive about $2,600 a month at full retirement age or $3,500 at 70. My family maximum is $4,668 per month. I am having a hard time finding out what each dependent would earn monthly. Also, when my older child turns 18, does my younger child’s payment increase?

Answer: Starting Social Security earlier than age 70 means giving up the delayed retirement credits that otherwise would boost your checks for the rest of your life, and potentially those of a surviving spouse. As mentioned in an earlier column, though, child benefits complicate the math that typically favors waiting to claim Social Security.

Once you start your own Social Security benefit, each eligible child could get an amount up to 50% of your benefit. Eligible children are those who are unmarried and younger than 18, or under 19 if they’re still in high school, or 18 or older with a disability that began before age 22.

There’s a maximum a family can receive based on one worker’s earning record, however. The family maximum is 150% to 180% of the worker’s benefit. If your family’s total benefit would exceed that maximum, the children’s checks would be reduced, but yours would stay the same.

If you were receiving $2,600 a month, and your family maximum is $4,668, your children would split the remaining $2,068 and get $1,034 apiece. Once your older child is no longer eligible, your younger child’s benefit would increase to equal 50% of what you receive ($1,300, plus any cost of living adjustments).

If you were to start your benefit now, before your full retirement age, these checks would be subject to the earnings test that reduces the benefit by $1 for every $2 earned over a certain limit, which is $18,240 in 2020. The earnings test doesn’t apply after full retirement age.

Free Social Security claiming calculators typically don’t include child benefits as a variable, so you’d be wise to invest $20 to $50 in a more sophisticated calculator, such as Maximize My Social Security or Social Security Solutions.