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Today’s question comes from Jay:
“I have reached full retirement age and am drawing Social Security. If my spouse is 62 or over but did not earn more than half of what I did, can she start receiving 50% of what I make from Social Security?
If she then continues working and eventually earns enough that her benefit is more than half my benefit, can she then claim her own benefit?”
A reduced benefit forever?
First, and perhaps most importantly, if your wife takes her spousal benefit before she reaches full retirement age (FRA), she will receive a reduced benefit. Her benefit will be less than 50% of your benefit.
When she claims a spousal benefit, she will be “deemed” to have taken her own benefit. In other words, she will effectively claim her own benefit when she claims her spousal benefit. This means that she will have a reduced benefit for the rest of her life, unless her husband dies and she eventually switches to survivors benefits.
You stated that your wife is still working and that at some point her benefit may exceed 50% of your benefit. Just as any Social Security benefit is calculated based on the best 35 years of earnings, her benefit will also be recalculated if her new work increases her benefit.
If at some point her own benefit exceeds 50% of your benefit — but not before then — she will see her benefit increase in a way that reflects these new earnings. But it is important to keep in mind that if she claimed her benefit before FRA, her benefit will still be smaller than it would have been if she had waited to claim at FRA.
There is also an additional concern if she claims before her FRA. She may also be subject to the “benefit-deferral feature,” also known as the earnings test. If her income is high enough, she may see her benefits reduced this year by as much as $1 for every $2 she earns over $17,640. The reduction in her benefits will be less as she approaches her full retirement age.
It is sometimes called the “benefit-deferral” feature, because this loss of benefits is only “deferred.” When she reaches full retirement age, her benefits will increase to reflect how many months of lost benefits she suffered.
For example, if she loses six months of benefits, the benefit she will get at full retirement will be adjusted so that it is equivalent to the benefit she would have received if she had claimed a spousal benefit six months later than she did.
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The questions I’m likeliest to answer are those that will interest other readers. So, it’s better not to ask for super-specific advice that applies only to you.
I hold a doctorate in economics from the University of Pennsylvania and taught economics at the University of Delaware for many years. Presently I am teaching at Gallaudet University.
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Disclaimer: We strive to provide accurate information with regard to the subject matter covered. It is offered with the understanding that we are not offering legal, accounting, investment or other professional advice or services, and that the SSA alone makes all final determinations on your eligibility for benefits and the benefit amounts. Our advice on claiming strategies does not comprise a comprehensive financial plan. You should consult with your financial adviser regarding your individual situation.