Ask Rusty – Did We Make a Mistake Starting My Wife’s Social Security now?

Dear Rusty: I hope we haven’t made a mistake! My wife just applied for her Social Security benefit. She was born in May 1962, and the estimated amount of her benefit is $1280/month. Her work income last year was $5,616; however, mine was about $65,000. I do not plan on taking my benefit until the age of 70 in July of 2027.

My worry now is about the penalty for earning too much. We figured that since her 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 they look 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 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% 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%, 10%, 12% or 22% 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 full retirement age (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 Annual Earnings Test (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+), your wife’s monthly SS retirement benefit will be permanently reduced (by about 26%). 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+) is less than 50% of your FRA entitlement, then her benefit will increase. However, she will not get the full 50% of your FRA entitlement because she claimed her own SS retirement benefit before her FRA (more likely, she will get about 34% 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 only a relatively modest amount of income tax will be paid on her Social Security benefits.

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). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (amacfoundation.org/programs/social-security-advisory) or email us at ssadvisor@amacfoundation.org.