Should I File At Age 62 If I Have A Younger Wife And Minor Child?

Category: 
May 31 2018 - 4:25pm

I'm 61 years old Income $41500 I plan on working up into my 70's if I can
My wife is 42 $21000
Daughter 10
I'm like to take my Social Security at 62 so that I can take advantage of my daughters 50% (until 18) and my wives 50% until my daughter turns 16 even if I don't get a penny on mine until 66.6 because of my income
With the above info ...what is my best strategy?

Hi,

First of all, it sounds like you may have a misconception about how the earnings test works (https://www.ssa.gov/planners/retire/whileworking.html). If you file for your benefits before full retirement age and your wife and daughter qualify on your record, not only could your benefits be subject to withholding if you earn too much but your wife and daughter's benefits could also be withheld.

For example, say John files for benefits this year at age 62 and his wife and daughter also qualify for benefits on his record. John's full retirement age rate (PIA) would be $1800, but his reduced age 62 rate is $1320. The family maximum benefit (FMB) on John's record is $3280, so to determine the amount that could be paid to John's wife and daughter we first subtract his PIA from the FMB. The resulting $1480 would then be split between his wife and daughter, giving them a benefit rate of $740 each.

So, John's family would have potential monthly benefits totaling $2800 (i.e. $1320 + $740 + $740) in this example. However, John is still working and will earn $42040 in 2018, or $25000 more than the 2018 earnings test exempt amount of $17040. Therefore, the earnings test would require withholding of $12500 of benefits (i.e. $1 of benefits for each $2 of excess earnings) before any payment could be made to John or his family members. As a result, the whole family's benefits would be withheld for 4-plus months before benefits would be paid to any of John's family members. After the necessary amount is withheld, all 3 family members could then be paid for any remaining months of the year unless either John's wife or daughter also have earnings in excess of $17040. The process would then start over again in 2019 and subsequent years until John reaches full retirement age.

When to file for your benefits is entirely a personal decision, and you may feel that filing at age 62 is best for you and your family. But you should be aware that it will almost certainly result in you receiving a lower monthly benefit rate for as long as you live. And, filing for your benefits early would also almost certainly limit the benefit rate that your wife could receive as a widow on your record should you die before her (https://secure.ssa.gov/apps10/poms.nsf/lnx/0300615320).

Before filing, you should strongly consider using our maximization software to compare your various options and determine your best strategy.

Best, Jerry