Q & A
Ask Rusty – Social Security for couple with large age difference
Dear Rusty: My wife is 63 and I’m 55. I’ve been the breadwinner for 37 years and draw almost $2000 per month tax free from VA disability for life. I’m also still working until I’m 60 or 62, not sure yet, and will have a pension of about $1900 per month. We have about $300k put away in retirement accounts. Since I still have a few years I haven’t really looked much into retirement. Is there anything you can recommend on how to go about social security with the age difference? Signed: Younger Husband
Dear Younger: With your VA disability benefit, your expected pension from work, your savings and your eventual Social Security benefit you are positioned better than many for your later retirement. You didn’t say whether your wife is already collecting Social Security benefits on her own work record, and that can be a factor in deciding when you should apply. This is because (from what you’ve told me) your wife will eventually be entitled to spousal benefits from your record. To start, please note that your wife’s full retirement age (FRA) for Social Security purposes is 66 years and 2 months, while your full retirement age is 67. Your full retirement age is when you get 100% of what you have earned from a lifetime of working, but if you claim benefits earlier than your FRA, they will be reduced and if you wait beyond your FRA you can earn more. When to claim your Social Security should always take several things into account – your health, your current (and future) financial needs and your expected longevity. You cannot claim your Social Security until you are at least 62 years of age, but if you claim at 62 you will incur a 30% cut in the benefit you would be entitled to at age 67, and that is a permanent reduction.
Assuming your wife will be eligible for a spousal benefit from your record, since she will have reached her FRA whenever you claim benefits she can get up to 50% of the benefit amount you are due at your full retirement age. But if she claimed her own SS retirement benefit before her FRA, her spousal benefit will be somewhat reduced. Your wife cannot get her spousal benefit until you start collecting your Social Security so that may be a factor influencing the decision of when you should apply. While that might suggest you should apply as soon as you’re eligible, you should also remember you will take a cut in benefits by claiming earlier than your FRA. You can maximize your benefit by waiting beyond your FRA to apply and earning delayed retirement credits which would yield a benefit 8% higher for each year you delay, up to age 70 when you could get 24% more than you’ll get at age 67. However, delaying would mean your wife can’t collect her spousal benefit until you start your benefits, so you should weigh the loss of her spousal benefit against the increase you get by delaying (remembering that you would get the higher benefit for the rest of your life, which is where expected longevity comes into play). And one other point: if you claim before your FRA and continue to work, you will be subject to Social Security’s annual earnings limit until you reach your FRA (exceeding the annual limit will cause Social Security to withhold some of your benefits).
So, as you can see, there are numerous considerations when it comes to deciding when you should claim your Social Security. I suggest you get a Statement of Estimated Benefits from Social Security. You can do that by contacting your local office (find it at www.ssa.gov/locator) or by creating your personal “My Social Security” online account at www.ssa.gov. Your Statement of Estimated Benefits will show your estimated benefit at ages 62, 67 and 70, and you can evaluate which of those amounts is most beneficial, considering your financial needs, your wife’s potential spousal benefit, and your anticipated longevity.
This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (amacfoundation.org/programs/social-security-advisory) or email us at ssadvisor@amacfoundation.org.