Ask Rusty: Did We Make a Mistake Starting My Wife’s SS now?

Dear Rusty: I hope we haven’t made a mistake. My wife just applied for her Social Security (SS) benefit. She was born in May 1962, and the estimated amount of her benefit is $1,280 per month. Her work income last year was $5,616; however, mine was about $65,000. I do not plan on taking my SS benefit until the age of 70 in July 2027. My worry now is about the penalty for earning too much. We figured that since my wife’s income was so low, we wouldn’t have to worry about that penalty, so we signed her up, and then it hit me: what if the IRS looks at my income, especially since our tax return is filed as married filing jointly. Do we have a problem, or are they just going to look at her income to determine if there is a penalty? I hope I haven’t messed this up. Also, I think I read that any penalty you are assessed for earning too much is returned to you once you reach full retirement age (FRA); is that true? Signed: Uncomfortable Senior Citizen Dear Uncomfortable Senior: First, let me ease your anxiety — you haven’t “messed this up.” While it’s true that your income will be included when the IRS determines how much of your wife’s Social Security benefits are taxable, changing your IRS filing status is usually not wise. However, considering your combined income and your “married/jointly” IRS filing status, up to 85 percent of the SS benefits your wife receives during the tax year will be included as part of your overall taxable income as a married couple. Your wife’s monthly SS benefit is about $1,280, so about $13,000 (annually) will be included in your adjusted gross income (AGI) when you file your taxes. You can have income tax withheld from your wife’s SS benefit by filing IRS Form W-4V at your local SS office (you can have 7 percent, 10 percent, 12 percent or 22 percent withheld). Note your wife’s tax obligation for this year will be less because she will not get SS benefits for all of 2025. The other thing you are concerned about is whether your income will be counted when determining if your wife will be subject to Social Security’s “annual earnings test” (AET), and the answer to that is “no.” At her current earnings level (about $5,600), your wife is well below the annual earnings limit ($23,400 for 2025) for those collecting early Social Security benefits. So, the AET will not apply and will not reduce your wife’s monthly Social Security benefit. FYI, if her earnings did exceed the annual earnings limit, it is true that some of the resulting penalty would be recovered after she reaches her FRA of 67. Note the distinction between “taxation of SS benefits,” and the “annual earnings test” for those collecting early benefits. Taxation of benefits is always based on your joint income when filing married/jointly, but the AET looks only at your wife’s personal work earnings until she reaches her FRA. As I expect you already know, by claiming now (at age 62-plus), your wife’s monthly SS retirement benefit will be permanently reduced (by about 26 percent). Until you later claim your SS benefit, your wife will receive her reduced personal SS retirement amount. But, when you claim, her benefit amount will be reassessed to see if she is also entitled to an incremental amount as your wife. If her SS entitlement at her FRA (even though she claimed at 62-plus) is less than 50 percent of your FRA entitlement, then her benefit will increase. However, she will not get the full 50 percent of your FRA entitlement because she claimed her own SS retirement benefit before her FRA (more likely, she will get about 34 percent of your FRA entitlement). In the end, you really did not make a mistake by filing for your wife’s Social Security to start now. By the time you personally apply at age 70, your wife will have collected about $46,000 in Social Security benefits which, I’m sure, will be helpful. And you will pay only a relatively modest amount of income tax on her Social Security benefits.

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Russell Gloor is a national Social Security advisor at the AMAC Foundation, the nonprofit arm of the Association of Mature American Citizens (AMAC). The 2.4-million-member AMAC says it is a senior advocacy organization. Send your questions to: ssadvisor@amacfoundation.org. Author’s note: This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained, and accredited by the National Social Security Association (NSSA). The NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity.