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Ask keeperumiami Your Own Question
keeperumiami, Senior Tax Expert & Financial Planner
Category: Social Security
Satisfied Customers: 6108
Experience:  Sr Tax Expert/Financial PlannerCPA/PFS (retired)Over forty years of advising individuals & small businesses
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I am going to retire as of 01/2017 I will be 65 in 10/2016.

Customer Question

I am going to retire as of 01/2017 I will be 65 in 10/2016 . My wife is planning on working (She'll be 62 in November 2015). Is it a good idea to apply for spousal social security. She will get @ the same Social security check as I will be getting when she retires. What are the tax consequences?
Submitted: 16 days ago.
Category: Social Security
Expert:  keeperumiami replied 16 days ago.

Hello, my name is***** goal is to give you a complete & accurate answer. I am working on your request now & I will respond as soon as possible.

Customer: replied 16 days ago.
Expert:  keeperumiami replied 16 days ago.

First, let me clear up a couple of items/facts.

1. If you retire on 1/2017 at age 65 & 3 months and begin to collect Social Security at that time, since your Full Retirement age is 66, your Full retirement benefit will be reduced by approximately 5% or 6% depending upon your actual retirement date, since you are retiring prior to your full retirement age.

2. In the case of your wife, since she is planning on continuing to work, it would not make sense for her to file for Spousal benefits because it is unlikely that she would actually receive anything as her benefits will be substantially reduced or eliminated, based upon the fact that her benefits will be reduced by her earnings until she reaches full retirement age. For example, to the extent that her annual earnings exceed $15,720. (the current earnings limit), her benefits will be reduced by $1. for every $2. she earns over the earnings limit. So, how much she would actually receive depends upon here annual earnings until she reaches her full retirement age. Also, note that her maximum Spousal benefit at age 62 would approximate 35% of your full retirement benefit as the maximum Spousal benefit is 50% of your full retirement benefit at age 66, which would then be further reduced to approximately 70% of that amount for taking her benefit early at age 62. (100% x 50% x 70% = 35%). So with that type of significant reduction of the Spousal benefit, and then further reduced by the earnings adjustment describe above, I doubt that she would actually receive any Spousal Social Security benefits until she fully retires. At that time her benefits based upon her own earnings record, would be substantially higher than any Spousal benefit she may be entitled to receive. In that case, the Social Security Administration would automatically pay the highest benefit she is entitled to receive, which would be based upon her own earnings record.

Of course, since your wife is planning on continuing to work, 50% to 85% of either or both of your Social of your Social Security benefits will also likely be subject to income taxes, depending upon the amount of your adjusted gross income.

As you can see, it get quite complicated.