Dear Carrie: My husband is almost 62 and working part time. I'm 54, have always been the primary breadwinner and plan to work at least another decade. He's thinking of taking Social Security soon, but I think he should wait until later so that he gets a bigger benefit. What's your opinion? --A Reader
Dear Reader: Interestingly, you and your husband both have a point. While you're correct that if he takes Social Security before what the IRS designates as normal retirement age (66 for those born between 1943 and 1954), his benefits will be permanently reduced by approximately 25 percent. The upside is that although his checks would be smaller, he'd collect them for a longer period of time.
However, as a married couple, and especially with your age and income differences, there are a few other things to consider. In fact, having your husband take benefits early could actually work in your favor.
ON THE PLUS SIDE: THE 62/70 COMBINATION
This is a strategy that can work when the lower-earning spouse takes Social Security early and the higher-earning spouse waits until age 70 to file for benefits. In your case, your husband could take his benefits at 62, augmenting his earnings, while you continue to work full time. Then when you reach full retirement age, you'd have a choice. You could, of course, take your full benefits at that time. But you also have a couple of other options.
Rather than taking your own benefits, you could claim a spousal benefit, which is 50 percent of what your husband receives. That would put some extra money in your pocket, while you let your own benefits accrue until you reach age 70. Or -- and this is another interesting strategy for couples when one spouse's benefits are significantly higher than the other's -- you could file for full benefits and immediately suspend them. This would allow your husband to file for the spousal benefit based on your work record, potentially getting more than what he receives on his own, while you wait until 70 to collect.
With either of the last two choices, your own benefits would continue to accrue by 8 percent per year for each year you wait to collect beyond your normal retirement age. Wait until 70 and that's a 32 percent increase. In the meantime, there would be more money in your collective pocket through the spousal benefit scenario that works best for the two of you.
ON THE MINUS SIDE: DEDUCTIONS AND TAXES
When Uncle Sam gives, he also takes away in the form of taxes. In your situation, you have two tax considerations to factor into your equation.