Dear Rusty: I have been advised by my financial planner to start my wife’s social security benefits at the age of 62 (she is now 61). I am 65 and still employed, not on Medicare, and not taking social security benefits. My wife’s benefits are much less than mine. I hope to wait until age 70 before starting my benefits. My income is currently $160,000. Do you see this as a wise choice to start my wife’s SS benefits at age 62? Signed: Planning Ahead
Dear Planning: Whether your wife should start her benefits at age 62 depends upon whether her own benefit at age 70 would be more than she is entitled to as your spouse at her full retirement age (FRA). You can get these estimates from Social Security. If her own benefit would eventually be higher than her spousal benefit from you, she can wait to get her own higher benefit at age 70 (as you are). But if her benefit as your spouse will be the highest she can attain, then claiming her own benefit before you claim yours could be a good choice, but there are some things to consider if she does that:
First, if your wife claims at age 62 (or any age before her FRA), that will mean that her eventual spousal benefit when she claims it (when you claim your SS) will be less than 50% of the benefit you are entitled to at your full retirement age. Taking her own benefit earlier than her FRA will mean her spousal benefit from you will be reduced to less than half of your FRA benefit amount, even if that spousal benefit starts after she has reached her FRA.
Second, if your wife is still working, by claiming her own benefit before her FRA she will be subject to Social Security’s “earnings test” which limits the amount of money she can make without SS taking back some of her benefits. For 2020, the annual earnings limit is $18,240 (changes annually) and SS will take back benefits equal to half of any earnings which exceed that amount. The earnings limit becomes less severe during the year your wife reaches her FRA and goes away entirely after she reaches her FRA, but if she works while collecting early SS benefits the earnings limit could affect her benefits.
Third, your wife’s Social Security benefits will become part of your taxable income (assuming you file “married-jointly). Taxation of your wife’s Social Security benefits will be determined based upon your combined income if you file your taxes as a married couple. At your combined earnings level, up to 85% of your wife’s SS benefits will become part of your taxable income.
I’m not suggesting you not follow your financial planner’s advice; I only want to make sure you’re aware of all the factors involved when benefits are claimed early. Sometimes, a wife claiming at age 62 is a prudent choice as your financial planner has suggested. But sometimes understanding the above factors may lead to a different strategy.
This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (amacfoundation.org/programs/social-security-advisory) or email us at email@example.com.