How Couples Can Boost Their Social Security Income

Q. My wife and I started our Social Security benefits at age 62 in 2013, but we later realized that we needed more income. So, we are both going to look for jobs now. Can we stop our benefits if it looks like we are going to make more income than allowed, and start our benefits back at any time later? —Don

A. If you or your wife stop your benefits before either of you turn 66, you will simply be giving up Social Security income. The only way to increase your benefits is by suspending them at age 66, which is full retirement age (FRA) under Social Security rules; that age gradually rises to 67 for those born after 1954. At the point, filers can get higher income from delayed retirement credits by postponing claiming (more on that below).

That said, there are steps you can take to maximize your Social Security income. But the claiming rules for couples are a little complicated, so bear with me, as I walk you through the key decision points.

First, the basics. It is true that if you find new jobs, your additional income may temporarily reduce your Social Security benefits. If you go back to work in 2015, and either of you earns more than $15,720, Social Security will withhold $1 in benefits for every $2 above this earnings limit. (Make sure you understand how the Social Security defines earnings; here's a brochure that includes this information.)

But these benefit reductions are not lost to you, just delayed. Once you reach FRA, they will be repaid to you in the form of a higher benefit that will last the rest of your life.

At age 66, the right to suspend benefits kicks in. During that time, the benefit will rise by 8% a year, plus the amount of any annual-cost-of-living adjustments. Claimants can restart the benefit at any time, but the delayed income credits max out after age 70, so there's no advantage to waiting any longer than that.

The Pitfalls of Dual Benefits

You also need to consider the rules involving spousal benefits. Whether you realize it or not, one of you has already filed for these benefits. This is because both of you claimed your retirement benefits "early"—before reaching FRA.

The first spouse to file for retirement benefits will have been treated as filing only for those benefits. The filing by the first spouse enables the second spouse to claim spousal benefits. But that second spouse was "deemed" to be simultaneously entitled to dual benefits—their retirement and spousal benefits.

Very few married couples understand deeming, which ends at FRA. Because most people file for Social Security before reaching FRA, it's worth going into some detail about the way it can affect benefits.

Under deeming, Social Security gives you benefits that are roughly the greater of the two benefits, spousal or retirement. If you were entitled to a spousal benefit of $1,000 at full retirement age, and an individual retirement benefit of $400, you would end up with about $700 at age 62—the $1,000 spousal benefit after the early retirement reduction. Of course, the agency has a more complicated way of arriving at the precise number. Here is a hypothetical example supplied by Social Security spokesperson Dorothy Clark:

"A person entitled to a reduced retirement benefit (RIB) on his or her own earnings and a reduced spousal benefit on his or her spouse’s record is dually entitled. The person will be paid on two separate records. The person will be paid the smaller benefit first on his or her own record plus the excess amount of the larger one on the spouse’s record totaling the higher amount.

"For example: A spouse at age 62 whose FRA is age 66 is entitled to a benefit of $1,000 before reduction. She is also entitled to a retirement benefit (RIB) of $400 before reduction. The full RIB is subtracted from the full spouse benefit. The excess ($600) is then reduced to $420. The RIB is reduced to $300. The total payable is $720, the sum of the reduced spouse excess and the reduced RIB. Additionally, since both payments are paid from the same trust fund, we will issue a combined payment."

Although deeming ends at FRA, your benefits are permanently reduced by your decision to file early in 2013.

Suspending Benefits at 66

The spouse who was dually entitled to retirement and spousal benefits in 2013 has the choice of suspending his or her individual retirement benefit at age 66. But whether it makes sense to do this depends on the relative size of those benefits.

If your spousal benefit was greater than your retirement benefit, you can continue to receive the difference—the excess spousal benefit—after the retirement benefit is suspended. The suspended retirement benefit, meanwhile, will rise in value due to delayed retirement credits. Depending on the size of the retirement benefit, it may rise enough to surpass the amount of the dual benefit you were receiving. But if doesn't, you should forget about suspending the retirement benefit at FRA—just continue to receive the dual benefit.

The spouse who was the first to file for retirement was, as I've explained, not considered dually eligible for two benefits. So if this spouse chooses to suspend benefits at FRA, he or she would be eligible to file for just a spousal benefit at that time. This would permit the retirement benefit to increase until it reaches the maximum amount at age 70. At this point, it would make sense to switch to that benefit, assuming it was larger than the spousal benefit.

Whether any of these scenarios make sense for you is, of course, depends on your need for current income and whether or not you can afford to defer Social Security benefits.

To figure out your best course of action, you can set up an account at "my Social Security" and run your actual benefit projections through Social Security's calculators. (You also could plunk down $40 and get a wider range of claiming scenarios from Maximize My Social Security, a software program developed by economist Larry Kotlikoff, who is a co-author of our new book on Social Security.)

If this is all crystal clear to you, congratulations! Go to the head of the class! I still get confused by Social Security's complicated rules and I write about them nearly every day.

Best of luck.

Philip Moeller is an expert on retirement, aging, and health. His book, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” will be published in February by Simon & Schuster. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

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