No. The earnings limit ($15,120 in 2013 for beneficiaries who are age 62 through full retirement age) applies only to the income of the person who is collecting a monthly Social Security benefit check. It is that person's income that determines whether benefits are reduced. One dollar in benefits is withheld for every $2 in earnings above the earnings limit amount.
Where a working spouse's income will have an effect is in the taxation of Social Security benefits if a joint federal income tax return is filed. Therefore, it might be wise to calculate your taxes as both a married couple filing jointly and two spouses filing separately. An individual or couple’s marginal tax bracket affects the amount of Social Security benefits received on an after-tax basis.
Before 1984, Social Security benefits were not taxed on federal income tax returns. Since then, if the total of taxable pensions, wages, interest, dividends, and other taxable income, tax-exempt interest income, plus one-half of Social Security benefits (referred to collectively as “provisional income”) are more than $25,000 for singles and $32,000 for married couples filing jointly, up to 50% of Social Security benefits are taxed.
If income exceeds $34,000 for singles and $44,000 for joint filers, up to 85% of benefits are taxed. Unlike Social Security benefits themselves, these dollar amounts are not indexed for inflation and thus affect increasing numbers of beneficiaries over time.
Taxes on Social Security benefits are especially problematic for married couples when one spouse collects benefits while the other remains employed with a good salary, thereby pushing household income over the taxable limits. In this case, it will be necessary to withhold money for taxable Social Security benefits either by overwithholding through the working spouse's employer or by making quarterly estimated tax payments.
We would like your feedback on this Personal Finance Frequently Asked Question.