My sister will be eligible for divorced spousal benefits. She would like to start at 62, due to low income, and her former spouse is the same age. Her FRA is 67. I believe she can still file a restricted divorced spousal benefit application. Her income is about 30K, so I am unsure if her monthly benefit will decrease the month she hits the 17040 income limit or is that decrease figured differently?
Your sister could only file a restricted application for just divorced spousal benefits only if she was born prior to January 2 1954, and even then she could only do so if she waited until her full retirement age (FRA) to apply. If she files for divorced spousal benefits before FRA she'll be deemed to also be applying for her own retirement benefits, and she'll only be eligible for essentially the higher of those 2 benefit rates. Furthermore, if she files prior to FRA her benefit rate will be reduced for age and her benefits would be subject to full or partial withholding based on Social Security's earnings test (https://www.ssa.gov/planners/retire/whileworking.html).
The way Social Security applies the earnings test is to suspend a person's entire benefit payment for as long as it takes to withhold $1 of benefits for each $2 that the person expects to earn in excess of the exempt amount. This year the exempt amount is $17040, so if your sister files this year at age 62 and expects to earn $30000 in 2018 Social Security would withhold the first $6480 (i.e. ($30000 - $17040)/2) of her 2018 benefits before paying her anything.
Before deciding what to do, your sister should strongly consider using our maximization software in order to explore and compare her various filing options so that she can choose the best possible strategy.