I'll apply for Social Security at 66. Shortly thereafter my wife will turn 62 and apply for a spousal benefit. Will that benefit be reduced if she continues working? If she collects spousal benefits until she's 70, will the benefit based on her own work record increase from the amounts she'd get at ages 62 and 66?
If she takes a spousal benefit at 62, she won't be able to switch to her own full benefit at age 66 or to an enhanced benefit at age 70. At 62, she'll receive the larger of two amounts -- 32.5 percent of your full benefit or 75 percent of her own full benefit. Her monthly check will always be smaller than if she'd applied at full retirement age.
If she keeps working, her monthly benefit will be subject to an annual earnings limit until she turns 66. In 2015, a person who is under full retirement age and collecting Social Security while working temporarily forfeits $1 of benefit for each $2 earned above $15,720 until the year he or she turns 66, and then temporarily forfeits $1 of benefit for each $3 earned above $41,880. After 66, the benefit is recalculated to make up for the forfeited amounts.
Here's a better strategy. At 62, she applies for her own discounted benefit, and you file for a spousal benefit based on her record. Since you'll then be older than 66, you'll get 50 percent of her full benefit, and you'll be allowed to postpone your own benefit, which will grow 8 percent a year until you're 70. And if you keep working in the meantime, you won't forfeit any benefit no matter how much you earn.
THE BOTTOM LINE You get much better options if you take Social Security at your full retirement age.
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