What you should know about Social Security disability benefits

Social Security rules are complicated and change often. For the most recent “Ask Larry” columns, check out maximizemysocialsecurity.com/ask-larry.

Boston University economist Larry Kotlikoff has spent every week, for over two years, answering questions about what is likely your largest financial asset — your Social Security benefits. His Social Security original 34 “secrets,” his additional secrets, his Social Security “mistakes” and his Social Security gotchas have prompted so many of you to write in that we feature “Ask Larry” every Monday. Find a complete list of his columns here. And keep sending us your Social Security questions.

Kotlikoff’s state-of-the-art retirement software is available here, for free, in its “basic” version. His new book, “Get What’s Yours — the Secrets to Maxing Out Your Social Security Benefits,” (co-authored with Paul Solman and Making Sen$e Medicare columnist Phil Moeller) was published in February by Simon & Schuster.

Watch Larry explain how Paul and his wife could collect an extra $50,000 in Social Security benefits:

Sarah: I filled in that I have a disabled child on your Social Security calculator. My son receives Social Security Income but has earned over the SGA ​(substantial gainful activity ​amount)​ of $1,090​ per month about three times this year and may receive over this amount again. He works as a software tester with a company that trains and pays people with autism.

From reading your columns, am I correct to understand that he is permanently not entitled to the disabled child benefits when my husband or I file for retirement? If so, should I recompute the benefits by leaving my son off the calculation, as the maximized benefits are based on my and my son’s child-in-care benefits? I was trying to find the answer online, but it is so confusing. Thank you.

Larry Kotlikoff: I want to issue a general warning to you and other parents with disabled children. If your disabled children earn too much money, they can become ineligible to collect either child or child survivor benefits on your work record.

Parents with disabled children may feel that getting them to work and be independent is in their best interest. And it certainly is. But the Social Security system will penalize them, potentially big time, for the rest of their life if they earn a bit too much in a given year.

I asked Jerry Lutz, the former Social Security Technical Expert, to weigh in on your specific question. He does so below and confirms my concern.

Jerry Lutz: Substantial gainful activity over the course of the year​ is calculated using average monthly earnings. If your son works all 12 months with roughly the same hours, you would divide his calendar year earnings by 12 to get the average monthly amount. If the average countable earnings exceed $1,090, the work would normally be considered SGA, and if it occurs after age 22, it would rule out subsequent entitlement as a disabled adult child.

Note though, that I referred to countable earnings, which is the amount that remains after subtracting Impairment Related Work Expenses and subsidy if they are applicable. ​

N: I’ve read “Get What’s Yours” and want to confirm what I should do. Thank you in advance for your amazing service to the public.

I’m 63 and have been on Social Security Disability Income since 1994. I also receive disability income from my prior employer, which will end when I’m 65, but I’m promised a pension to begin when I’m 65 in August 2017.

My husband is 64 and retired from his career, but he currently has a modest income as a city councilmember. His projected Social Security benefit is more than mine.

Should I ask Social Security for spousal benefits for my husband to start now? Is there a six-month retroactive payment? Would spousal benefits continue for him, whether or not I “withdraw” my retirement benefits at age 66 with a 521 form and wait for my maximum retirement benefit at age 70? How will him taking spousal benefits affect his Social Security benefit? Would you recommend that he wait for his maximum retirement benefit at age 70? How would the family maximum benefit affect us?

Larry Kotlikoff: If your husband files for benefits on your record before he reaches full retirement age, he would be forced to take reduced benefits on his own record as well, which would effectively eliminate the spousal benefits. What he can do is wait until his full retirement age, file for just spousal benefits and then switch to his own account at age 70. The fact that he drew benefits on your account first has no effect on what he will receive on his own account.  The family maximum could reduce what he’s entitled to while you’re receiving disability benefits, but not after you convert to retirement benefits at full retirement age. If this is the case, you may be better off to file for retirement benefits early when he reaches full retirement age.  This would cause you to temporarily receive a smaller benefit, but may provide a higher total for you and your husband. Your benefit would return to the full rate when you reach age 66.

You can no longer withdraw the conversion of your disability benefits to retirement benefits at full retirement age, because Social Security changed their rules after our book was published.

Kathleen: Thank you for speaking with me and helping me to maximize my benefits. I was married twice, both times in excess of 10 years. My first spouse has a primary insurance amount (PIA) of $1,238. My second spouse is deceased and had a PIA of $2,647. He was deemed disabled on March 13, 2013 and passed away on May 2, 2015 at age 60. I will be 61 next month. My estimated benefits are as follows: at age 62 it will be $1,220; at 66, $1,738; and at 70, $2,367. I work full time and plan on continuing to do so until about age 70. From my best guess, I was planning on taking my survival benefit at 66. I was wondering if I could take spousal benefits from my first husband when I turn 62 (he is currently 62) and then switch to my survival benefits at 66. Also, someone told me that you can take survival benefits in January of the year you turn 66. My birthday is not until November, so that would help out if it were true. I couldn’t find anything to substantiate this. I really appreciate your help in my maximizing my benefits! I tell all of my friends about your book. Thank you again for your help and let me know if you need any other information from me.

Larry Kotlikoff: If you take benefits before full retirement age, you’ll be subject to the earnings test. That aside, it sounds like the best thing to do is to collect your own retirement benefit early at age 62 and wait until 66, your full retirement age, to start collecting your widow’s benefit when it will start at an unreduced level. Your own retirement benefit at 62 will be reduced by one quarter compared to your primary insurance amount (your full retirement benefit). At 62, you will be forced to take your reduced excess divorcee spousal benefit as well. But it will be calculated as .7 x (.5 x your ex’s primary insurance amount – your primary insurance amount). Since your primary insurance amount exceeds half of your ex’s primary insurance amount, the excess spousal benefit will be negative, meaning it will be set to zero.

Jane – Fla.: I am in dire need of help, advice and a clear direction to take. I live in Florida, and I worked for the same employer for what added up to 28.5 years. In 2008, I became ill and started my journey through many long hospital stays and even spent months in a nursing home. I never got better and was determined disabled and qualified for Social Security Disability Insurance with my own years of work. The amount I was told was the maximum that I could get was $1,200. But after Medicare deductions, my income was too high to be eligible for Supplemental Security Income [a separate Social Security benefit].

Meanwhile, while I was struggling to get better, my husband was perfecting his skills of having affairs, and he walked out of the house and stopped helping me financially. I struggled trying to pay for everything and be there for our three children. I did the best I could with my finances until I ended up in the hospital and then over a year in rehab. We lost our home and had to sell it in a quick sale in 2013 — which was the only time my husband came to sign the paperwork. After that he bought his girlfriend, or what he tells everyone is his wife, a mobile home, in which they both live together until now. In October 2014, he filed for divorce while my son was lying in a hospital bed in intensive care due to unexpected illness.

We have gone through what seems like a court visit once a month, and he refuses to give me any assistance financially. He makes about $47,000 to $50,000 a year, and I only make $13,000 a year. I’m 56, and he 58. I just found out that he had a 401K that he withdrew without my knowledge and melted it all. I still have my retirement through my job from the state of Florida, which I have not touched. I don’t even know how much, but I don’t understand how this all works. They tell me that I will lose my retirement, because it will go into Social Security income when I turn of age, but I don’t even know how old I have to be for that. Is there any way that I can take any of his Social Security accumulated income at any time? At this time, we are still going through the divorce. We’ve been married for 36 years.

I know it’s a lot, but I really need help with what direction to take to either increase or preserve my only source of income. If you can enlighten me, I thank you from the bottom of my heart.

Larry Kotlikoff: You can collect what you now get plus a reduced excess spousal benefit (essentially the difference between half of his full retirement benefit and 100 percent of your full retirement benefit) starting at age 62 based on your husband’s work record, but the excess spousal benefit will be permanently reduced if you take it before your full retirement age.  Also, unless you get divorced, your husband must file for his benefits in order for you to draw on his account. If he dies, you can, starting at age 60, collect what you’re now getting plus a reduced excess widow’s benefit (the difference between your reduced widow’s benefit and your own reduced retirement benefit). If you get divorced, the story is the same.  Don’t shoot him, but he sounds just awful.

David: I read and thoroughly enjoyed “Get What’s Yours,” but I have one question for the authors, which I did not see answered in the book.

My birthday is in the middle of the month, as is my wife’s. She is six months older. When I turn 66, I intend to file and suspend to allow my wife to commence collecting her spousal portion of my Social Security. May I file and suspend on the first day of the month, as Medicare allows for insurance purposes, or do I wait for my actual birthday, and if I wait, then does my wife receive only a half-month amount for the first month?

Larry Kotlikoff: You can go into the office up to four months before the month of your full retirement age birthday and file and suspend in advance, but it’s effective the month you reach full retirement age.  Your wife can also file for spousal benefits to commence the month you attain full retirement age.   Social Security will pay her for the full month, but her check will arrive a month late. In fact, if your birthday happens to fall on the first day of a month, Social Security will consider you to have attained full retirement age in the month prior to your birthday, and your wife could be paid for that full month as well.

Bill: I purchased the book, “Get What’s Yours.” It provides a trove of valuable information, but I do have a question regarding divorcee benefits.

I was married for 20 years, divorced and have since remarried. I am 65, and my ex-wife is 67. I was the primary earner and have annually paid the maximum into the system. My ex-wife’s earnings were significantly smaller and inconsistent. I don’t plan to take my benefits until after age 70. I don’t know if my ex-wife has applied for any of her benefits, including any benefits she might be entitled to as a result of our former marriage.

My question is, am I entitled to draw any benefit from her benefits? It would seem that she can draw on my earnings, but it is unclear as to whether I can. Any help or advice you can provide would be appreciated.

Larry Kotlikoff: You can’t collect divorcee spousal benefits on your ex’s work record, because you are married. If you got married after age 60, you’d be able to collect divorcee widower benefits, were your ex to die, provided they exceed your own retirement benefit.