File for Social Security Early to Help Spouse?

Dear Dr. Don, My husband plans to work until at least age 66. We both turn 62 next year. Can he do the "file and suspend" at 62, and I draw (Social Security benefits) off his record? Is there a reduction in what he receives at age 66 (or 70) if he goes this route? We don't really hear much about the "file and suspend" options ... Please clarify them for us. -- Lou Limits

Dear Lou, The "file and suspend" trick only works when one spouse has reached full retirement age. The idea behind file and suspend is to allow the worker at full retirement age to earn delayed retirement credits, which only happens from that age up to age 70, while still allowing the other spouse to claim the spousal benefit.

A spousal benefit can only be paid if the working spouse has filed for Social Security benefits. When a worker files for retirement benefits, the worker's spouse may be eligible for a benefit based on the worker's earnings. Another requirement is that the spouse must be at least age 62 or have a qualifying child in his or her care. A qualifying child is a child younger than age 16 or a child who receives Social Security disability benefits.

Since your husband plans to work until age 66, which is his full retirement age, it doesn't make sense for him to file for benefits at age 62 just so you can claim a spousal benefit. You'll both take a hit in terms of your monthly benefits, and his benefits may actually be reduced or withheld up until his full retirement age.

If he is younger than his full retirement age for the entire year he claims benefits, then $1 is deducted from his benefit payment for every $2 he earns over the annual income limit. In 2011, that income limit is $14,160. At full retirement, his monthly benefit is recalculated, leaving out the months where his benefits were reduced or withheld because of the income limit.

The income limit is different in the year he reaches full retirement age, with a $1 deduction for every $3 earned above a higher income limit, and the Social Security Administration only counts the earnings in the months before he reaches full retirement age. In 2011, that higher-income limit is $37,680. There's also a special earnings test rule that applies, typically in the first year of retirement, which converts the annual income limits to monthly income limits to determine whether he gets a full benefit check for the month.

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