My wife is 12 years older than me. She turns 65 in May. She’s wanting to retire at 66 and 4 months. I’ll still be working until I’m 67. What would be our best tax strategy for filing jointly?
Hi. I assume that you're referring to strategies designed to reduce the income tax that you might owe on your wife's Social Security when she starts drawing her benefits. I'm not a tax expert, but I can tell you that using the 'married filing separately' option generally isn't a good choice with regard to Social Security income. Social Security benefits are exempt from income taxes if a couple files jointly with a combined income below $32,000, but the exempt amount of income is zero if a couple uses the 'married filing separately' option (https://www.ssa.gov/benefits/retirement/planner/taxes.html.
If your and your wife's combined countable incomes will exceed $32,000 then you'll likely have to pay income taxes on part of your Social Security benefits. A more important factor for the two of you is making sure that you choose the best filing strategy to maximize your benefits. Your best strategy likely depends in large part to your relative primary insurance amounts (PIA), as well as their health and overall financial situation. A person's PIA is equal to their Social Security retirement benefit rate if they start drawing their benefits at full retirement age (FRA).
Your wife couldn't qualify for spousal benefits at least until you start drawing your Social Security retirement or disability benefits. If her PIA is higher than your PIA, then she your wife should at least consider waiting until age 70 to start drawing her benefits. Your wife's Social Security retirement benefit rate would grow by 2/3rds of 1% per month for each month she waits past FRA to start drawing her benefits until she reaches age 70. But, if your wife's PIA is less than your PIA, and particularly if it's less than 50% of your PIA, then she may be better off filing sooner.
If your wife dies before you, then your potential survivor benefit rate could be adversely affected if she starts drawing her benefits prior to age 70. But, that likely wouldn't play much of a role in your decision-making if your PIA is significantly higher than your wife's PIA.
Our software (https://maximizemysocialsecurity.com/purchase) is designed to calculate Social Security benefits rates and fully analyze the filing options available to couples and individuals based on their unique set of circumstances. It sounds like you and your wife should strongly consider using the software to analyze your options to help you determine your best strategy for maximizing your benefits.
Best, Jerry
