Can you explain the earnings test as it relates to the year you reach full retirement? Wondering if it would be worth my husband taking the reduction from 100% to 96.11% of his full retirement in exchange for the $50,000 he could earn before it would affect his monthly benefit. . The reduction would be about $74 in his benefit, but I think I’m understanding that it would not affect my spousal benefit and my sons DAC benefit. We would still get the full retirement/family max amount.

I’m just not completely understanding how if works. I feel like there’s a catch I’m missing. His full retirement date is august 2022, so this would take place next year. Thank you so much.

Hi. The earnings test changes in several ways in the year that a person reaches full retirement age (FRA). First, only earnings earned in the months prior to the month in which the person reaches FRA are counted, and the exempt amount of earnings is higher that year than it is for people who won't reach FRA until a subsequent year. Also, if a person earns in excess of the exempt amount in the months before they reach FRA, the amount of benefits withheld is $1 for every $3 of excess earnings.

The exempt amount of earnings for people reaching FRA in 2021 is $50,520. So, if your husband reaches FRA in 2021 and if he earns less than that amount in the months prior to the month in which he reaches FRA, then the earnings test wouldn't require withholding of any of the benefits payable from his account including any auxiliary benefits (e.g. spousal, child). But, if he earns more than the exempt amount in the months prior to reaching FRA, any amount of benefits that need to be withheld would be recovered by withholding your husband's benefits AND any auxiliary benefits for as long as it takes to withhold the required amount.

You are correct that your and your son's potential auxiliary benefit rates wouldn't be any lower if your husband starts drawing his benefits prior to FRA, but any reduction for age applied to his benefit rate would be permanent unless any of his benefits prior to FRA are withheld due to his earnings. And, if your husband takes a reduced benefit rate, that could cause you to receive a lower survivor benefit in the event of his death.

Furthermore, any reduction for age applied to your husband's benefit rate wouldn't allow more of the family maximum benefit (FMB) amount to be paid to you and your son. For example, say that a worker's full retirement age rate, or primary insurance amount (PIA), is $2000 and the FMB is $3500. If that worker starts drawing benefits at FRA and if he or she has an eligible child and a spouse who qualifies for child in care spousal benefits, the worker would receive $2000 and the spouse and child would each receive $750. Thus, the full FMB would be paid. But, if the worker starts drawing early and his or her benefit rate is reduced to $1800 for example, that $200 reduction wouldn't be redistributed to the spouse and child. Their benefits would stay at $750 each, meaning that only $3300 of the FMB would be payable to the family.

The best filing strategy for your family depends on many different factors, so you and your husband should strongly consider using our software (https://maximizemysocialsecurity.com/purchase) to fully analyze all of your options so that you can determine the best possible strategy for maximizing benefits for your family.

Best, Jerry