Welcome to our “Social Security Q&A” series. You ask a question about Social Security, and a guest expert answers it.
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Today’s question comes from Rhonda:
“I have not worked out of the home in over 10 years. I will turn 62 in a couple of months. At that time, I plan to apply for my Social Security retirement benefits and a spousal supplement. My husband started his benefits two years ago at age 65. For a year, his benefit was reduced by the Social Security earnings limit. Since he has now surpassed his full retirement age (FRA), the earnings test no longer applies to him. Since I have no earned income, will my benefits be subjected to the earnings test, since my husband continues to earn well above the earnings limit?”
How the Social Security earnings test works
Rhonda, first let me briefly explain the Social Security earnings test. It applies to Social Security recipients who have earned income and who are less than their full retirement age.
For 2020, the annual earnings limit is typically $18,240. (An exception: For those reaching their FRA in 2020, the limit is $48,600.) For every $2 of earnings above $18,240, Social Security benefits are reduced by $1. (For those reaching their FRA in 2020, the reduction is $1 for every $3 in earnings.)
The earnings penalty applies both to an income earner’s own retirement benefits and any spousal benefits arising from that recipient’s record.
For example, suppose a 64-year-old husband has annual retirement benefits of $20,000 and his wife is receiving $5,000 as a spousal supplement on his record. If he earns $2,000 above the limit of $18,240, total benefits on his record are reduced by $1,000.
In this case, his retirement benefits are reduced by $800 and his wife’s spousal benefits are cut by $200 for the year. (For more information about the earnings test, check out this publication.)
Notably, the earnings penalty is forgiven if one lives to a normal life expectancy. If you have benefits withheld due to the earnings test, your monthly benefits are adjusted upward when you reach your FRA. The adjustment allows you to recapture any benefits withheld if you live into your mid-80s.
Let’s now circle back to your question, Rhonda. Your husband has attained his FRA, so his earnings no longer have any effect on your spousal benefits. Next, since you are not working for earnings, no earnings penalty can arise.
So, there is no need for concern about the earnings test in this instance.
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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 Wisconsin and taught economics at the University of Delaware for many years.
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.
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