Q & A

Q: I retired at age 62 but my wife still works because she does not have a lot of earnings on her own record.  She is 64 years old and will not be able to get her full benefits until 66.  If she starts drawing SS early from my benefits, would she be able to get my full benefits if I should pass away?

A: Your wife could start a spousal benefit based on your work record rather than her own.  However, her spousal benefit would only be about half of the benefit you receive and that might be low since your benefit was reduced for early retirement at age 62.  It would be reduced further if she retires before 66.  In addition, if your wife continues to work and earns more than the Social Security earnings restriction rules allow, then her spousal benefit would be reduced yet again, or even wiped out.

For workers who have not reached full retirement age like your wife, one dollar is deducted for every two dollars earned over the exempt amount, which in 2007 is $12,960 or $1,080 per month.   For example, if your monthly Social Security benefit is $1,000 then your wife would receive a spousal benefit of $500 at her full retirement age.  However, if she starts benefits before her full retirement age, she would receive less than $500 because the benefit would be reduced for early retirement.

In addition, if she plans to continue working and has a spousal benefit of less than $500, a job that pays more than $2,000 per month would wipe out her entire monthly spousal benefit.  $2,000 - $1,080 = $920 over the limit divided by 2 = $460 which would be withheld.

If you pass away, your wife would be entitled to a survivors benefit based on your account.  If full retirement age, she would receive 100% of the amount you are receiving.  However, if she is under full retirement age, the amount she receives will be reduced.  If she works and has not yet attained age 66, her widow’s benefit would be reduced by the amount over the earnings limit.

With seniors living longer, and with the rapid growth of Medicare premiums, her Medicare costs could outgrow the amount she would receive in a spousal benefit should both of you live another ten or fifteen years.  It may be to your advantage for your wife to continue to delay retirement a little longer until age 66.