Must I Sell My Business to Be Eligible for a Widow's Social Security Benefit?

Q: I went to my Social Security office twice last year and received two different answers about the benefit I'm entitled to get. I am 64 and still working. I own my own business, but my income from that is very small. I also receive a small retirement check from a previous employer.

My ex-husband is deceased. We were married 18 years and I am not remarried. When I asked about collecting the widow’s benefit I was told the first time that I could receive his full amount less the reduction for earning over $14,160 a year. 

The second answer was I would receive a discounted amount from his benefit, not the full amount -- plus I would need to sell my store because I wasn't considered retired. 

I have no idea what amount I am really entitled to. If I start taking his reduced benefit now, will I receive the full benefit when I reach 66, or will that always remain the same? Also, do they count my retirement check in the $14,160 annual earnings cap, or just earned income?  --RT via email

A: At each visit to this Social Security office, you received an incorrect answer, and the second one is a lulu!

You don’t have to sell your store. That's nonsense. Whether or not you’re considered ‘retired’ for Social Security purposes depends on your age. So does your eligibility to collect a survivor's benefit. They have nothing to do with whether you own a business or are still in the workforce.

As a person who was married at least ten years and hasn’t remarried, you qualify for Social Security based on your ex-husband’s work record just as you would if you were still married.

Since he is dead, the benefit you're entitled to is a widow’s benefit -- and the earliest you can collect it is age 60.

But there are two drawbacks to taking your widow’s benefit before you reach full retirement age, which in your case is 66.

The first drawback is that you’ll receive a discounted amount. At full retirement age, you’d get 100% of the amount he was entitled to receive. At 60, you’d receive only 71.5% of it. At 62, you'd receive 81 % of his benefit, and so on. You'll get annual cost of living adjustments, but your benefit check will always be smaller than if you'd waited until you were 66 to start collecting it.

The second drawback to taking a Social Security benefit while you’re under your full retirement age is that you forfeit some of it if you earn more than a specific amount every year. At 64, you’d forfeit $1 for each $2 you earn over $14,160. After you turn 66, that earnings cap disappears and you collect the full benefit you're entitled to regardless of the amount you earn.

The $14,160 earnings cap applies to wages from your job (including bonuses, commissions and vacation pay), and also applies to net earnings from self-employment, says Kaye Thomas, a Chicago tax attorney. Self-employment earnings generally count in the year you received them, even if they were earned in an earlier year.

Your retirement check does not count. The earnings cap doesn't apply to pensions, annuities or investment income, says Thomas. “You can have an unlimited amount of income other than earnings without a reduction in Social Security benefits under the earnings test.”

Please send your questions to [email protected].  I'm sorry I can't respond personally to every email. Questions are only addressed online.

 (c:) Lynn Brenner, All Rights Reserve