I just turned 64, my wife is 62 1/2. I am retired but have not filed for SS. She is still working and expects to work for several more years. My question is: If she were still working at 64 1/2 (when I would be 66) and applied for SS benefits, thereby enabling me to apply for restricted application spousal benefit (knowing she would not get any money because of the 50% reduction while working rule) would I be able to collect restricted application spousal benefit? Our plan would be for her to suspend benefits at 66, knowing that would terminate my spousal benefit (but we would be getting 1 1/2 years of spousal benefit income). Our plan is for each of us to file for our own benefits at 70.
I understand her benefit would be recalculated after she stopped work, would the recalculation be the same as if she had waited to apply? (assuming her reduced benefit would be 0 because she had not reached FRA and earned 'too much') Thank you for any help you can give.

Hi,

Your wife must actually be drawing her benefits in order for you to collect spousal benefits. If she files prior to full retirement age (FRA) and her earnings cause her benefits to be withheld, your spousal benefits would also be withheld.

For example, say Jill files for benefits this year at age 64 1/2. Jill's full retirement age rate (PIA) is $1000, but her reduced rate is $900. Jill's husband John is 66 and he files for spousal benefits on her record so his unreduced spousal rate is $500, or 50% of Jill's PIA. In this example then, a total of $1400 per month would be payable from Jill's account.

However, if Jill is still working the 2017 Social Security earnings test (https://www.ssa.gov/planners/retire/whileworking2.html) would require withholding of $1 of the benefits payable on Jill's record, including John's spousal benefits, for each $2 that Jill earns in excess of $16,920. So, if Jill earns $56,920 this year, a total of $20000 (i.e. ($56,920 - $16,920)/2) of her and John's benefits would need to be withheld before either of them could be paid benefits. In this example then, neither Jill nor John could be paid any benefits in 2017 because their combined yearly benefit rate of $16,800 (i.e. $1400 x 12) would be less than the $20,000 required to be withheld due to the earnings test.

If your wife files for benefits prior to FRA but doesn't receive any benefits prior to FRA due to her earnings, her benefit rate would be recalculated and raised back up to her unreduced rate. However, that would mean that you didn't receive any spousal benefits either, which would defeat your original purpose.

You and your wife should strongly consider using the maximization software available on this website to determine your best strategy. The software handles earnings test considerations, and would enable you to determine the overall effect on both of your benefits if your wife does file prior to FRA.

Best, Jerry