Dear Rusty: I am almost 63 and my husband will be 61 soon, and we are looking to see when our best time would be to start our Social Security benefits. We would like to know if one of us qualifies for benefits from a previous marriage from 1984 to 1995. And we are wondering if I can start drawing at age 65, in two years, or if it is better that I wait until 67 because my spouse is two years younger than me. Also, if I were to continue working limited hours after 65, what would my earning limit be? Signed: Almost Ready
Dear Almost Ready: The first thing to understand is that full retirement age (FRA) for both of you is 67. If either of you claim before that, your monthly benefit amount will be permanently reduced and, because you are working, you will be subject to Social Security’s “earnings test.”
If you claim your benefit at age 65 your monthly payment will be about 87% of what you would get if you claimed at age 67. If your husband claims at age 62, his benefit will be about 70% of his FRA amount. The only way to get 100% of the benefit you’ve each earned from a lifetime of working is to claim at your FRA. You can choose to claim at age 65 as long as you’re comfortable with the benefit reduction which will occur, and as long as your annual work earnings do not significantly exceed the earnings limit for that year. In any case, when each of you claims will not affect the other’s retirement benefit amount.
Social Security’s “earnings test” for those claiming before FRA sets a limit for how much can be earned before some (or all) benefits are taken away. The earnings limit for 2024 is $22,320, but it changes yearly. If you claim early benefits and your work earnings exceed that year’s limit, Social Security will take away $1 in benefits for every $2 you are over the limit. They take away by withholding future benefits long enough to recover what you owe for exceeding the limit. If you significantly exceed the annual earnings limit, you may be temporarily ineligible to receive SS benefits until you either earn less or reach your FRA (the earnings test no longer applies after you reach your FRA). I cannot predict what the earnings limit will be two years from now, but it will be more than the 2024 limit and published at that time. FYI, in the year you turn 67 your pre-FRA earnings limit will be much higher, and when you reach your FRA the earnings test no longer applies.
Regarding your previous marriage, you cannot receive spousal benefits from an ex-spouse while you are currently married. But when to claim may also be influenced by whether either you or your current spouse will get a spousal benefit from the other. If the FRA (age 67) benefit amount for one of you is more than twice the other’s FRA entitlement, the one with the lower FRA amount will get a ”spousal boost” to their own amount when both of you are collecting.
Spouse benefits reach maximum at one’s FRA, but each person’s personal SS retirement amount will continue to grow if not claimed at FRA. Waiting past FRA to claim allows the SS retirement benefit to grow by 8% per year, up to age 70. So, with an FRA of 67, claiming at age 70 will yield a payment 24% higher than the FRA amount, 76% more than the age 62 amount, and about 37% more than the age 65 amount. But waiting beyond FRA is only smart if financially feasible and life expectancy is at least average (about 84 and 87 respectively for a man and woman your current ages). And, as a general rule, if one’s spousal benefit at FRA (50% of their partner’s FRA entitlement) is highest, then that spouse should claim at FRA to get their maximum benefit.
Russell Gloor is an Association of Mature American Citizens certified social security advisor. To submit a question, visit amacfoundation.org/programs/social-security-advisory or email ssadvisor@amacfoundation.org.
