Will I Forfeit Years Of COLAs If I Delay My Social Security Retirement Benefit?

Today’s column addresses questions about whether increases for inflation (COLAs) are lost by waiting to file, restricting applications, foreign pensions and spousal benefits, income and disability benefits and when child benefits end. 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.

Will I Forfeit Years Of COLAs If I Delay My Social Security Retirement Benefit?

Hi Larry, If I delay retirement 16 months past FRA, I understand the benefit increases by 0.67% per month through delayed retirement credits. So after delaying 16 months, the monthly benefit will increase to 110.7% of my FRA amount. During this 16 months, there are two COLAs amounting to 2.8% for the first year, and 1.6% for the second year. If I elected to not delay my benefits past my FRA, I would have received both COLAs. What about the person who delayed? Since I delayed receiving my benefits, will I forfeit the COLAs? Thanks, Laszlo

Hi Laszlo, Cost of living increases (COLAs) are not forfeited due to delaying the start of Social Security benefits. People eligible for Social Security retirement benefits receive credit for all of the Social Security COLAs that occur after they turn age 62, regardless of when they choose to start drawing their benefits.

With regard to delayed retirement credits (DRC), I should point out that although you earn delayed retirement credits (DRCs) for each month that you decline to draw benefits between full retirement age (FRA) and 70, you aren’t immediately credited with all of the DRCs you’ve earned unless you claim benefits either in a) the month of January, or b) the month you turn 70. If you elect to start your benefits in any other month between FRA and 70, you are initially only credited with the DRCs that you accrued through December of the year prior to filing. Your benefit rate would then be adjusted effective the following January to credit additional DRCs for the year of filing.

For example, say Tom reached FRA in 6/2018 and starts his benefits in 8/2019. Although Tom would have earned a total of 14 months of DRCs, he is only credited with 7 DRCs (i.e. June through December 2018) when calculating his benefit rate for the months of August through December 2019. Then, effective January 2020, Tom’s benefit rate would be adjusted to give him credit for the additional 7 DRC months he earned in 2019 (i.e. January through July).

Furthermore, the benefit adjustments to credit partial year DRCs are not processed immediately. My understanding is that the automated process used to adjust rates for partial year DRCs is only done every other year. So Tom in the example above may not see the rate increase for his 2019 DRCs until sometime during the year 2021. His increase would be paid retroactively to 1/2020, however.

Before you decide on when to start drawing your benefits, you can find your maximized strategy and explore your other options using my company’s software — Maximize My Social Security or MaxiFi Planner. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

Can My Wife Claim Spousal Benefits On My Record And Let Her Benefit Rate Keep Growing?

Hi Larry, I’m 65 and have been getting Social Security retirement benefits since I turned 62. My wife who is 66 has not claimed any Social Security benefits. Since she was born before 1/1/1954, can she now claim spousal benefits on my Social Security record and let hers keep growing? Even though I think that is foolish because I think it would take her forever to get back what she could have collected in the past 4 yrs and the next 4 year. Thanks, Doug

Hi Doug, Yes, it sounds like your wife would qualify to file a restricted application for spousal benefits only, and doing so would likely be far from foolish. Your wife’s own Social Security retirement benefit rate would continue to grow by 8% per year until she reaches 70 even if she’s drawing spousal benefits, so you could argue that it would be like having her cake and eating it too. Best, Larry

Does My Wife’s Pension From The UK Affect Her Spousal Benefits?

Hi Larry, My wife only worked 12 quarters in the US. She is a UK and US citizen. We met and married in London. She became a US citizen after she moved to the US with me. She is currently drawing spousal benefits on my record. She is 71 and I am 73. Last year she filed for a UK Government pension (She worked in the UK from 1974 to 1988) and also a private pension benefit from her UK employer. The UK Government Pension she receives is about $4,500 per year and the private employer pension about is $3,000 per year. I understand that by definition the UK Government Pension is not subject to GPO, but does it reduce her US Spousal Benefits under WEP? Same question for the UK private pension benefit. She started drawing US Benefits in 2016 and the two UK pensions in 2019. Thanks, Trevor

Hi Trevor, The Windfall Elimination Provision (WEP) only applies to US Social Security retirement or disability benefits that are based on a person’s own Social Security work credits. WEP does not apply to auxiliary or survivor benefits payable based on the work record of another person, such as spousal or widow’s benefits. Best, Larry

Will My Disability Benefits Be Affected By My Partnership Income?

Hi Larry, I am currently on full disability and wondered if there is any penalty for having a K-1 (business partnership income) issued to me? And do I need to report this to Social Security as I am not performing any job duties. Thanks, Erik

Hi Erik, The answer to your question depends on the specific circumstances involved with your partnership. Income from a partnership could only have an adverse effect on Social Security disability (SSDI) benefits if the income is considered to be ‘earned.’ If your partnership income is classified as earned under IRS rules, you would be required to report your earnings on a schedule SE and pay self-employment taxes. You might want to check with the person who prepares your taxes to see if your partnership income will require you to pay self-employment taxes. If it does, you should report the details of your partnership involvement to Social Security. Best, Larry

When Should My Son Receive His Last Payment?

Hi Larry, I received a booklet from SSA yesterday. I receive survivor’s benefits for my son after my husband’s death. He will turn 18, and will receive it until June, when he finishes high school. The new booklet states: “A child’s benefits stop with the month before the child reaches age 18, unless the child is disabled or is a full-time school student….” indicating that they pay in advance, so he will have his last check in May. Shouldn’t he receive a check in June also? You answered what seemed to be a similar question and stated the opposite from what the booklet stated.

You wrote that Social Security basically pays benefits a month behind. So, if you are eligible for a benefit payment for the month of June, your payment would be scheduled for sometime in July. You also said the new SSA booklet now says: “the benefits are paid in the month following the month for which they are due and that, for example, you would receive your July benefit in August.” By that example, he should receive his last benefit in July. Yet, the woman at the SSA said it would stop in May. Thanks, Sherry

Hi Sherry, If your son turns age 18 in June, he would normally receive his last check in June, which is when Social Security pays benefits for the month of May. However, if your son is still a full time high school student and the school year ends sometime in June, then he’ll be paid in July for June. Social Security should send your son a notice shortly before he turns 18 telling him what he needs to do if he will still be attending high school in the month that he reaches age 18. Basically, he’ll need to have the school complete a form for Social Security that verifies his dates of full time attendance. Best, Larry

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