So if we are both high earners and we both retire at 70, will be then both get the maximum retirement benefit and not penalized by the other retiring early?
If I died before my spouse, then he would get his full benefit and my full benefit for life?
In what way are we penalized by one retiring at 62 and let's say the other retire at 66?
I need some real life scenarios to try to understand this.
Example A: A married couple--one was the breadwinner and the other for the most part stayed home, and the two of them are the same age. The breadwinner can file for benefits, typically at age 62, 66 (FRA), or 70. If his monthly benefit is say $1,500 at FRA, the 8%/year reduction/increase for early/late filing gives him the choice of 68%*$1,500=$1,020/month starting at 62, $1,500/month at 66, or 132%*$1,500=$1,980/month starting at 70. Apart from future cost of living increases that's what he'll get for life. At the same time, his spouse will receive 50% of his benefit ($750 at FRA--there are further cutbacks even below 50% if she collects at an earlier than FRA age, and apparently no increase to the $750 even if she collects at a later than FRA age) even though she paid no social security taxes. If he dies before her, at his death she steps up to his full ($1,020/$1,500/$1,980) benefit for the rest of her life.
Example B: A married couple--both of them had long working careers, and again the two of them are the same age. Both can file for benefits, typically at age 62, 66 (FRA), or 70. If the husband's monthly benefit is say $1,500 at FRA, the 8%/year reduction/increase for early/late filing gives him the choice of 68%*$1,500=$1,020/month starting at 62, $1,500/month at 66, or 132%*$1,500=$1,980/month starting at 70. Apart from future cost of living increases that's what he'll get for life. Suppose the wife's work record entitles her to say $1,200 at FRA, and she files at the same time that her husband files. Because her own benefit ($860/$1,200/$1,584) is greater than 50% of his benefit, that's what she'll get. If he dies before her, at his death she steps up to his full ($1,020/$1,500/$1,980) benefit for the rest of her life.
In neither case does the widow get a double benefit. But she does get the greater of what her husband was getting or what she was getting.
Example C: More complicated, courtesy of the Social Security Administration:
"
Early retirement reduces benefits: A spouse can choose to retire as early as age 62, but doing so may result in a benefit as little as 32.5 percent of the worker's primary insurance amount. A spousal benefit is reduced 25/36 of one percent for each month before normal retirement age, up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of one percent per month.
For a spouse who is not entitled to benefits on his or her own earnings record, this reduction factor is applied to the base spousal benefit, which is 50 percent of the worker's primary insurance amount. For example, if the worker's primary insurance amount is $1,600 and the worker's spouse chooses to begin receiving benefits 36 months before his or her normal retirement age, we first take 50 percent of $1,600 to get an $800 base spousal benefit. Then we compute the reduction factor, which is 36 times 25/36 of one percent, or 25 percent. Applying a 25 percent reduction to the $800 amount gives a spousal benefit of $600. Thus, in this case, the final spousal benefit is 37.5 percent of the primary insurance amount."
https://www.ssa.gov/oact/quickcalc/spouse.html
Edited to add: Originally I awarded the spouse in Example A an 8%/year upgrade if she collects later than FRA. I believe PamMo below is correct in saying her 50% is fixed at 50% of the breadwinner's age 66 benefit even if he and she waited until age 70 to apply.