How can this couple maximize Social Security benefits?

By Karin Price Mueller | NJMoneyHelp.com for NJ.com

Q. I’m 62 and considering retirement. I may work another six to 12 months. Both of my parents died in their early 70s because of health issues. I have the same issues. My wife is 59 and will work at least another three years to qualify for her pension, and her side of the family lives forever, with her dad at 93 and one his own. I plan to draw Social Security between 65 and 67 depending on my health, while my wife waits until she turns 70. She’s been the larger earner. And we have sufficient assets without Social Security. If I draw on my record at 65, my wife will be 62 and also likely retired. Will she get spousal benefits off of my account till she turns 70 and draws on her work record?

— Getting ready

A. It’s a great question.

You don’t want to do anything that would stop you, as a couple, from maximizing your benefits.

When Social Security was first established, the full retirement age was 65 and you could start taking your Social Security benefit as early as age 62.

If you did, you would receive a smaller benefit for life, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.

If you waited until age 70, you would receive a much larger benefit for the rest of your life, he said.

But now, the full retirement age has been increased, Kiely said.

For people born between 1943 and 1954 — people currently 67 to 78 years old — their full retirement age was 66. These people can take a reduced benefit as early as age 62, he said. If they do, their benefit would be 25% lower for life, Kiely said. If they waited until age 70 to receive their benefit, they would receive an annual benefit 32% larger than at age 66, he said.

For people born between 1955 and 1959 — currently 62 to 66 years old — full retirement age is 66 plus two months for each year after 1954.

“People born after 1960 have a full retirement age at 67 years old,” he said. “If your full retirement age is 67, your age 62 benefit would be 30% lower and if you waited until age 70, it would be 24% larger.”

You ask if your wife can claim a benefit under your work history when you begin taking your Social Security benefit — her spousal benefit — and wait until she turns 70 to begin taking her own higher benefit. The answer to this question used to be yes, until the law was recently changed, Kiely said.

Under current law, when you apply for Social Security you are applying for the largest benefit you are eligible for, he said. That means you get a benefit based on your own earnings record or 50% of your spouse’s earnings record — the spousal benefit.

“If you were born before Jan. 2, 1954, you could take a spousal benefit while your own benefit continues to grow,” Kiely said. “If you were born after Jan. 2, 1954, you get the higher benefit.”

You said that your wife was the larger earner.

“This means that 100% of her benefit will be larger then 50% of your benefit,” Kiely said. “To maximize benefits, she will have to wait until she turns 70 to apply for benefits.”

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Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com’s weekly e-newsletter.