Should a reader’s wife take a Social Security benefit at age 62? What happens to the Social Security Spousal Benefit? Here’s this week’s Question and Answer about Social Security.
Should my wife take my Social Security benefit?
Q: I would like your opinion on a Social Security question we have for my wife. First, I’ll give you basic information. My name is Bob. I am 69 years old and am on Social Security and I net $2,136 monthly. My gross Social Security benefit monthly is $2,284.50. My wife (Donna) is 61 years old and will turn 62 in August of 2022.
How much would she get?
At this time her Social Security projections would be at Age 62 = $718, at 67 = $1107, and at 70 = $1,430. Her income will be basically the same for these coming years. She makes about $21,000 yearly. Since I’m 8 years older, we are thinking that she should file but under my benefits. I understand that if she files under my benefits she would get half of my current benefit is $2,284.50. This would make her benefit $1,142.85 vs $718.
Is taking Social Security now the smart move?
Is taking Social Security a smart move for us? This seems to be to our financial advantage. Would you agree? Or, am I misreading the Social Security rules on spousal benefits? Any thoughts or advice you can give us on this would be greatly appreciated. I am semi-retired and we live on a tight budget. This extra money would help out now. The pandemic has dropped my earnings by about 90%. We are hoping it will eventually rebound. Thank you.
Spouse can claim up to half of your Social Security benefit
A: We’re not social security experts, but yes, you’re correct. An eligible spouse would be able to claim up to half of your benefit at her full retirement age, no matter what she is entitled to based on her own earnings. If you’re quoting from the Social Security Administration correctly, then taking half of your Social Security benefit seems like it would be more than what she would get unless she waited to age 70, which is 8.5 years from now.
At her full retirement age
She’s eligible for a portion of your benefit prior to her full retirement age. According to SSA.gov, if the spouse begins receiving benefits before their “normal (or full) retirement age” the spouse will receive a reduced benefit. However, if your spouse is caring for a qualifying child, the spousal benefit is not reduced.
SSA.gov has a calculator to check your benefit
If she’s 62 and claims her share of your benefit, she will be receiving benefits 60 months before her normal retirement age. She can start at 62 years plus one month, and her benefit will be 32.71% of your amount. Calculate the amount for yourself using the SSA.gov spousal calculator. Using this formula, the amount is $747 per month, which would be reduced further by the income test if she continued to work (see below).
Should she claim half of your Social Security benefit ASAP?
If she was entitled to a full half of your benefit, then it would be a lot more than what she is getting now, though slightly less than what she would get if she waited until she’s 70. It would make sense for her to claim Social Security as soon as she can. But, in fact, she’s getting just 67.39% of your benefit. Here’s how that math works:
How to do the Math from SSA.gov
A spouse can choose to retire as early as age 62, but doing so may result in a benefit as little as 32.5 percent of the worker’s primary insurance amount. A spousal benefit is reduced 25/36 of one percent for each month before normal retirement age, up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of one percent per month.
For a spouse who is not entitled to benefits on his or her own earnings record, this reduction factor is applied to the base spousal benefit, which is 50 percent of the worker’s primary insurance amount. For example, if the worker’s primary insurance amount is $1,600 and the worker’s spouse chooses to begin receiving benefits 36 months before his or her normal retirement age, we first take 50 percent of $1,600 to get an $800 base spousal benefit. Then we compute the reduction factor, which is 36 times 25/36 of one percent, or 25 percent. Applying a 25 percent reduction to the $800 amount gives a spousal benefit of $600. Thus, in this case, the final spousal benefit is 37.5 percent of the primary insurance amount.
Every year she waits, the number will go up, until she gets to her full retirement age of 67 and she is eligible for the full 50% of your benefit.
Social Security doesn’t cover health insurance
But there’s another important question you should consider: What are you doing for health insurance for her? If she gets that from her job, she may want to keep it, even if she’s claiming Social Security, since she won’t be eligible for Medicare until she’s 65. If she gets health insurance from her job, and she is healthy enough to continue to work, she might want to do that.
According to the Social Security Administration, she can claim the spousal benefit and still earn up to $18,960 if she under her full retirement age of 67. If someone reaches their full retirement age in 2021, the limit on earnings for the months before full retirement age is $50,520.
How much will be deducted from my Social Security benefit if I work?
According to the Social Security Administration, if you are under full retirement age for the entire year, $1 will be deducted from your benefit payments for every $2 you earn above the annual limit. So, if your wife is earning $21,000 and the limit is $18,960, she would lose $1,020 of the total benefit each year.
Here’s how Social Security figures the math: $21,000-$18,960 = $2,040. $2,040/2=$1,020. (That’s the amount deducted from her benefit.) Her Social Security benefit: $2,136/2= $1,068 (monthly) x 12 = $12,816 (her annual benefit, which is half of yours)-$1,020 (penalty until she reaches full retirement age) = $11,794 (amount she will receive annually if she continues to work after claiming half of your benefit).
But, she would still be getting the $21,000 in addition to the $11,794 annually. Combined with your Social Security benefit, this might help put you on firmer footing financially.
But she might qualify for Medicaid
She might, however, be eligible for Medicaid, depending on where you live. Make sure you understand how you’re going to cover health insurance before you do anything.
Read more about Social Security on ThinkGlink: