Spousal benefits for Social Security allow a spouse to collect Social Security based on the work history of the other spouse. You may collect spousal benefits as early as age 62. You may also continue to work, but Social Security penalties apply to earned income over an annual limit during early retirement years. It may be a good idea for the spouse with low income to claim spousal Social Security benefits early, according to the AARP. Early benefits give the couple long-term funds while reserving the greater Social Security payment for later.
The spousal benefit is never more than 50 percent of the full-retirement-age benefit of the primary worker. If you choose to collect a spousal benefit at age 62, you receive 32.5 percent to 35 percent of the full-retirement-age benefit of the worker. The spousal benefit increases with each month you wait to collect benefits, up to 50 percent at your full retirement age. Your spouse must file and qualify for Social Security for you to receive spousal benefits, but can suspend payments immediately.
Full Retirement Age
Collecting Social Security at any age between 62 and full retirement age is early retirement for Social Security calculations. Full retirement age is 66 for individuals born from 1943 to 1954 and 67 for individuals born after 1959. For persons born from 1955 to 1959, full retirement age graduates from 66 to 67 in two-month intervals. If you collect Social Security benefits prior to your full retirement age, penalties apply to annual income above $14,160 in 2011. This figure changes every few years.
Early Retirement Penalties
As of May 2011, if you continue to work while collecting Social Security benefits early, the first $14,160 is exempt from penalties. For every $2 you earn in excess of $14,160 for early retirement years prior to the year you reach full retirement age, Social Security takes back $1. If you notify Social Security of anticipated income in excess of $14,160, it withholds checks until your estimated penalty is paid. If you do not notify Social Security, it withholds penalties the following year when your federal tax return shows your income. A special rule may apply to the first year of retirement if you do not start benefits in January. This rule allows you to earn $1,180 for months in which you collect Social Security benefits during that first year, not holding you to the $14,160 annual limit.
Full Retirement Age
The year you reach full retirement age, you can earn $37,680 exempt from penalty. For each $3 you earn in excess of $37,680, Social Security withholds $1 for penalty. No additional penalties accrue the month you reach full retirement age or any of the months following. You can earn any amount of income without penalty at full retirement age.