Maximizing Social Security benefits

Money Watch: Maximizing Social Security benefits

Money Watch, a personal finance column that runs every Saturday, features a financial planner from the National Association of Personal Financial Advisors answering reader questions about saving, protecting and growing your money. To submit a question, e-mail USA TODAY personal finance reporter Christine Dugas at:

Q: I will soon be 66, but my wife will then be 62½. I am thinking that I will work until 68½ for health insurance purposes because she has health issues. Is that a good plan? And if I continue to work, can I start drawing Social Security at 66 and can she wait until she is 65 to draw on my benefits?

A: First of all, the plan that you’ve laid out indicates that you will be working to age 68½ in order to maintain health care coverage for your wife up to the point when she is Medicare-eligible at age 65. That seems well thought out. By doing so you will avoid having to find an individual insurance policy for your wife (as you’ve indicated she has some health issues) which would likely be much more costly to purchase than the group plan through your employer.

The second part of your question deals with when you should file for Social Security.You can file at age 66, which is the Full Retirement Age for you. At that point you can continue working with no impact to your Social Security benefits due to the fact that there is no earnings limit after you’ve reached age 66.

However, you will not be taking advantage of any benefit increases if you file for Social Security at age 66 when you are still working and don’t need the benefits to live on. For each month that you delay filing for your benefits beyond age 66, your benefit will increase by 2/3 of 1%.

Delay for a year, and your benefit will increase by 8%. This is in addition to the cost-of-living adjustments (COLAs) that are applied to Social Security most years. You can delay this filing to as late as age 70, at which point you would have increased your benefit by 32%.

As you delay this benefit, you’re not only increasing your own benefit when you do file, but if you die first, your wife will also receive that increased benefit amount after your passing as a Survivor’s Benefit.

The third part of your question: Can your wife file for a Spousal Benefit at age 65? Yes, she can as long as her own benefit isn’t greater than the Spousal Benefit — and as long as you have filed for your own benefit. The maximum amount that a Spousal Benefit can be is 50% of the amount of your benefit at age 66, your Full Retirement Age.

If your wife files the Spousal Benefit at age 65, she may only receive approximately 46.25% of your age 66 benefit. But if she waits until she reaches age 66, she would receive the full 50% Spousal Benefit.

There is a “file and suspend” Social Security strategy for married couples. It allows you to file for benefits and then immediately suspend it. But it allows your wife to still be eligible for Spousal Benefit. After you suspend benefits and delay claiming them, the benefits will continue to increase.

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