January 21, 2022

Will my husband have to apply retroactively in 2021 to get the 2022 Social Security COLA?

Today’s Social Security column addresses questions about whether it is necessary to file backdated to 2021, documenting current and future payments for past work performed on the income test and discrepancies in Social Security benefit estimates . Larry Kotlikoff is a professor of economics at Boston University and the founder and president of Economic Security Planning, Inc.

view more Ask Larry for answers here.

Do you have questions about social security that you would like to see answered? Ask Larry about Social Security here.

Will my husband have to apply retroactively in 2021 to get the 2022 Social Security COLA?

Hi Larry, My husband has postponed taking his Social Security benefits until he turns 70 in March. Now, with the COLA of 2022, we wonder if he should have filed in 2021 or if he should now file retroactively.

If he starts his benefits in October 2021, he will waive five months of deferred pension credits. But if I understand correctly, his benefit would increase in January with the COLA, which is expected to be more than those DRCs, plus he has another five months of benefit. Is this correct? Thanks, Kim

Hi Kim, Your husband does not have to start his benefits before the month he turns 70 to receive the January 2022 Social Security Subsistence Allowance (COLA). An individual’s retirement benefit percentage increases for all Social Security COLAs that occur after they reach 62, whether or not they receive benefits.

So if your husband claims his benefit five months before he turns 70, he will simply get a permanent monthly benefit rate that is 3.33% lower than the rate he would have received had he started drawing at age 70.

You and your husband may consider using my company’s software — Maximize my social security or MaxiFi Planner — to ensure that your household receives the highest lifetime benefits. Social Security calculators provided by other companies or non-profit organizations can provide good suggestions if built with extreme care. Dear Larry

How do I document for SSA that my income does not count for the income test?

Hi Larry, I am planning to retire at age 62 in two years as I have young children who get checks along with mine and another one for my wife as their caregiver. I am self-employed (LLC) and I am winding down my business with no new clients, no new work.

But due to the nature of my business, I get paid for some time, often several years, after I do the work. I have about $1 million in receivables for work that has been done in recent years and will continue to roll in for years to come.

I understand that money from work done before I retire doesn’t count in the income test, but how do I document and report the income to the SSA to make sure it’s not billed to me? Thanks Bradley

Hi Bradley, The specific documentation you may need to provide to Social Security will depend on the nature of your business and the type of income you receive. For example, documenting renewal commissions received by an insurance agent would be different from the documentation required for royalties received by an author.

In general, what to do after any year in which you a) received Social Security benefits before your full retirement age (FRA) and b) your earned income (i.e. net self-employment income and/or gross wages) in excess of the exempt amount for the Social Security Income Test, you should contact Social Security and provide them with a copy of your W-2 form(s) and/or Schedule SE from your tax return, along with any evidence you can provide showing that some or all income on your tax return was earned before the year in which you received a benefit.

Social security must then let you know whether there is any additional evidence that you must submit. Dear Larry

Can you explain the discrepancy in my estimated benefit?

Hi Larry, I’m 68, currently receiving a partner allowance and trying to decide based on my work record when to switch to the allowance. Social Security provided benefit estimates for January 2022 (I turned 69 in December 2021) and January 2023.

My deferred retirement credit should be 8% for every year after my full retirement age of 66, but according to Social Security, my 2023 benefit will be only 5.8% higher than my 2022 benefit. Can you explain the discrepancy? Thank you Carol

Hi Carol, I can’t say why you’re seeing this particular discrepancy, but Social Security estimates are sometimes inaccurate. One thing I can assure you is that if you turn 70 in December 2022, you will not want to claim your Social Security benefits later than that month.

And since your full retirement age (FRA) was 66, if you claim your benefit from the month you turn 70, your benefit percentage will be 32% higher than your FRA rate, or primary insurance amount (PIA). Dear Larry

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