Social Security Strategies
[1] Suppose your married client is aged 66 and his wife is 62; his income is much higher than hers, and the couple is trying to decide when to start taking Social Security benefits. If both start taking benefits now, she will receive permanently reduced benefits whether she relies on her work record or her husband’s.
[2] Suppose your married client and his wife both work and are both aged 66. The wife has an excellent health savings account (HSA) plan that she wants to keep funding. The client files for Social Security benefits and suspends payments so his wife can file for spousal benefits based on his work record. In order to receive Social Security, the wife must also sign up for Medicare. Medicare does not permit someone to fund an HSA and receive Medicare. The wife can no longer contribute to an HSA if she starts to receive Social Security payments. By law, Social Security and Medicare are linked together.
If someone qualifies for Social Security benefits and meets Medicare requirements, that person is entitled to Medicare Part A (hospital care). People covered by Medicare cannot contribute to an HSA because HSA accounts are only available to those with a high-deductible plan—Medicare is not a high-deductible plan.
[3] The penalties that reduce Social Security payments to recipients who have not reached full retirement age but continue to work also apply to spousal benefits and any earned income this spouse might have. When early benefits are applied for, Social Security automatically assumes the worker is applying for both earned and spousal benefits—only when full (normal) retirement is reached does someone have the option of applying only for spousal benefits.