Will my SIL lose money claiming retirement at 63 then switching to spousal benefits when husband reaches FRA?

The reps you spoke with weren't totally wrong - it's just complicated. Here's the simplified version: If your SIL claims her own retirement at 63, she'll get that benefit with a permanent reduction (probably around 80% of her PIA). Later, when your brother files at his FRA, she'll get her own reduced benefit PLUS the difference between that amount and her spousal benefit (if the spousal benefit is higher). The key is understanding that her spousal benefit will ALSO be reduced because she claimed her retirement benefit early. It's not that she'll get her full spousal amount - she'll get the difference between her reduced retirement and her reduced spousal amount. This is called "deemed filing" and it's why many financial planners advise caution about claiming early if you'll eventually be eligible for spousal benefits.

The previous comment is mostly accurate, but I want to clarify an important point. When your SIL claims at 63, her retirement benefit will be permanently reduced (about 75-80% of her PIA depending on her exact FRA). Later, when your brother files at his FRA, your SIL will become dually entitled. At that point, SSA will calculate: 1) Her reduced retirement benefit, and 2) Her reduced spousal benefit (which is reduced because she claimed ANY benefit before her FRA). She'll receive the higher of these two amounts, but practically speaking, she'll get her reduced retirement plus a partial spousal addon to reach the reduced spousal amount. I've studied this exact scenario for my own planning. The policy note you referenced (RS 00615.020) confirms this. SSA doesn't have two separate reduction factors - once she claims early, both benefits are calculated with early claiming reductions.

My wife went through something similar last year. What we found out is if your SIL waits until her own FRA to claim anything, she'd have more options. But once she claims early, she's stuck with reductions on everything. The system really isn't designed to let people cherry-pick the best of both worlds.

This is a perfect example of why SS is so frustrating!!! I spent THREE DAYS trying to get someone on the phone who could explain my situation clearly. Kept getting disconnected or waiting for hours. When I finally talked to someone, they gave me completely wrong information that would have cost me thousands if I had followed it! I finally used Claimyr.com to get through to an actual knowledgeable person. Saved me hours of frustration and got me to a rep who actually knew the dual entitlement rules. They have a video showing how it works: https://youtu.be/Z-BRbJw3puU In your SIL's case, she really needs to talk to someone who specifically understands the deemed filing rules for people born after 1954. The calculations are different than they used to be!

Let me try to break down the actual math because that's what matters here. If your SIL's PIA (full retirement age benefit) is $1,250 and she claims at 63, she'll get roughly $1,000/month (80% of PIA assuming she has a FRA of 67). If her potential spousal benefit at her FRA would be $1,675 (50% of your brother's PIA of $3,350), but she claimed her own retirement 48 months early, her spousal benefit will be reduced too. The spousal reduction is about 25/36 of 1% per month for the first 36 months and 5/12 of 1% for each additional month. So instead of $1,675, her reduced spousal benefit would be approximately $1,340. Since that's higher than her reduced retirement of $1,000, she'd get her $1,000 plus a $340 spousal add-on. The difference between claiming at 63 vs. waiting until her FRA is about $335/month FOR LIFE. That's over $4,000 per year, or potentially $80,000+ over a 20-year retirement. This is why these decisions are so critical.

my mom did something similar and regretted it. told me to tell everyone to just wait till FRA if they can afford it. the reduction is forever!!!

Has anyone considered that maybe she SHOULD take early benefits? I mean, we don't know their health situation or financial needs. Sure she gets less per month but she gets it for 4 extra years! Sometimes bird in hand worth more than 2 in bush!

One other thing to consider is that if your brother passes away (hopefully not for many decades!), your SIL would be eligible for survivor benefits. Those are calculated differently than spousal benefits. As a widow, she could get 100% of what your brother was receiving if she's at her full retirement age when she claims survivor benefits. However, if she claims survivor benefits early, they'll be reduced. The reduction factors for survivor benefits are different than for retirement or spousal benefits. This is why Social Security planning for couples often involves considering the higher earner delaying as long as possible (to age 70 ideally) to maximize the survivor benefit for whichever spouse lives longer.

After reading through this whole thread, I think your SIL has essentially three options: 1) Claim now at 63 and accept permanent reductions to both her retirement AND spousal benefits. This gives her income now but less income later. 2) Wait until her FRA to claim either benefit. This maximizes her spousal benefit when your brother claims. 3) A compromise approach: If she absolutely needs income now, she could consider whether she qualifies for any other benefits (like spousal benefits from a previous marriage if applicable) or look at other income sources to bridge the gap until FRA. The deemed filing rules that took effect for people born after January 1, 1954, eliminated many of the clever claiming strategies that used to exist. Now, when you file for one benefit, you're effectively filing for all benefits you're eligible for.