Dear Rusty: I will be at my full retirement age of 66 in June. I now work part time and plan to continue for the foreseeable future. My wife will be 63 in June. She now works full time but plans to shift to part time in the near future. I prefer to delay applying for Social Security as long as possible. Should my wife wait until she is 66 to claim her benefits? Signed: Planning Ahead
Dear Planning: Whether or not your wife should wait until age 66 depends on a lot of factors, including how healthy she is, what her family longevity history is, and if she needs the money sooner. If she takes her Social Security at age 63, she’ll get 20.9% less than she would get at her full retirement age, or “FRA”, which for her is 66 years plus 2 months. And if she claims her benefits early and continues to work, she’ll also be subject to Social Security’s “earnings limit” ($17,040 for 2018) which, if she exceeds it, will cause Social Security to withhold future benefits equal to $1 for every $2 over the limit that she earns (that limit goes away when she reaches her FRA). The earnings limit is something that you do not need to worry about because you are nearing your FRA; the limit goes way up (to $45,360 for 2018) in the year you reach your full retirement age and goes away completely once you’ve attained it.
If you plan to delay applying for your own benefits, you may already know that after June you will start accumulating “delayed retirement credits” at a rate of 2/3rds of 1% per month you delay (8% per year). Age 70 is when you’ll reach the maximum benefit available to you, but you can actually apply at any time after your FRA and get all the delayed retirement credits you’ve earn up to that point.
Because you were born in 1952 you have yet another option available which was eliminated in 2015 for all those born after January 1, 1954. If your wife decides to start her own Social Security benefits early, and after you have reached your full retirement age, you can file something known as a “restricted application for spousal benefits only”. By doing so you could collect ½ of your wife’s FRA benefit amount as a spousal benefit, while letting your own retirement benefit earn delayed retirement credits up to age 70 when your benefit would be 32% higher than it would be at age 66. This would obviously mean that your wife would be taking her benefit earlier than her FRA (and thus it would be reduced), but it would also mean that you would collect that spousal benefit for about 4 years before converting to your own. This is something you would need to look at carefully, specifically whether the financial advantage from using this option would offset the permanent benefit reduction your wife would incur by claiming her benefits earlier than her FRA.
The information presented in this article is intended for general information purposes only. The opinions and interpretations expressed are the viewpoints of the AMAC Foundation’s Social Security Advisory staff, trained and accredited under the National Social Security Advisors program of the National Social Security Association, LLC (NSSA). NSSA, the AMAC Foundation, and the Foundation’s Social Security Advisors are not affiliated with or endorsed by the United States Government, the Social Security Administration, or any other state government. Furthermore, the AMAC Foundation and its staff do not provide legal or accounting services. The Foundation welcomes questions from readers regarding Social Security issues. To submit a request, contact the Foundation at [email protected], or visit the Foundation’s website at www.amacfoundation.org.