Social Security Surprise!

[johngross]

Who would have thought a 64 year old stock boy working at Walmart would be making too much money . I'm sure some of you have experienced this with SS, so I would appreciate your input and help me to understand.

My full retirement age is 66 and 4 months. If I start to receive it early at 64, there is a limit on how much I can earn at my job without being penalized by having my SS benefit reduced. If I made less than $18,240 than no penalty is incurred. However, my taxable income is considerably higher than that. So this puts me in the "Special Earnings Limit Rule" category. Which means half of what I make over $18,240 will be subtracted from my yearly SS payout. For me this would be about a $10,000 loss each year in my SS checks until I reach my full retirement age, at which point the "Special Earnings Limit Rule" no longer applies.

Now, I understand the above, but here's the confusion. From the SS website is the following about how this money is not really lost (note my bold emphasis):

"If you're younger than full retirement age, and earn more than certain amounts, your benefits will be reduced. The amount that your benefits are reduced, however, isn't truly lost. Your benefit will increase at your full retirement age to account for benefits withheld due to earlier earnings."


https://www.ssa.gov/pubs/EN-05-10069.pdf


When I read this to the nice girl at the SS Office over the phone, she said it's not exactly correct and gave me a confusing explanation.

Everything I've researched on the web from credible sites all support the fact you do get reimbursed the money, albeit slowly over a period of years.

So, my question, has anyone experienced the "Special Earnings Limit Rule" and did you truly forfeit the money, or are you being reimbursed by receiving increased checks after you reached your full retirement age?

Thank you.

 

[GaryS]

I waited until I was 66 for exactly that reason. I looked when I first became "eligible" and between that and the WEP, it made no sense to start collecting earlier.

 

[Targets Guy]

I started drawing mine at age 60. I sometimes wish I had waited until 65 but not very often.

 

[JcMack]

I took SS at 62 because I was worn out from being "on call" 7x24 one week out of three. I wanted to cut back to 3-4 days a week and quit the mandatory on call. I never went to a SS office for info for explanation. I figured it out (I thought) and started SS payments in March of that year. The stupid, stupid ( did I say stupid?) mistake I made was not adding the income from my job from Jan-Mar of that year. By July after consulting with the CPA that does my taxes I found I owed the Gov three months of SS payments back. If you owe them 3 months for example they stop payments for three months. Everybody says beware the first year of SS payments if you take it early.

 

[Sistema1927]

You don't lose it, assuming you live long enough. It will be added back at full retirement age.

 

[Dave_n]

And if you can, defer taking it until you are 70 as you then end up with about 7-8% per year extra from your start date (normal full payment say 66 years old so that would be ~30% more each check) that is added permanently to your SS pension. Dave_n

 

[pasound]

The SS considers you at full retirement age at January 1 of the year you turn 66. I applied for partial at 65 to help pay for dental and eye work I needed. They told me I was good to go for 100% from the get-go as my 66th was in seven months. Then the lady back-dated the application and I got three months up front and full payments since. You will get your full amount. Other people I know who retired early have had larger increases than the regular amount as they got older.

 

[LoboGunLeather]

One of our financial advisors worked it out for us. Basically, if I waited to full retirement age I would receive a larger monthly benefit, but compared to taking the reduced benefit at 62 it would be 17 years before I reached the break-even point (in total payments received). For my wife that break-even point was at 15 years.

My SS benefits are significantly reduced anyway because I spent 24 years as a cop, participating in public employee retirement plans, so I made no SS contributions during those years. My monthly benefit is only about half of many others of my age.

I continued working until age 64 when I sold the business and retired for good. Proceeds from sale of the business were reported to IRS and treated as long term capital gains, not as ordinary income, so there was no penalty involved. I opened my SS benefit claim at age 62, but drew no benefits at that time. When I started the benefit payments I was able to do so at a time of the calendar (tax) year that allowed me to claim retroactive benefits for the preceding 9 months, so I started out with a nice little sum.

My point is that these matters should be discussed with a knowledgeable financial advisor so that we can maximize our benefits without blindly walking into the potential penalties. There is no hard and fast rule that will work best for every person.

 

[Bayou52]

I waited to FRA specifically to avoid the penalty...

 

[pasound]

LoboGunLeather - agreed. Social Security is like shooting pool. Every game is different. Just sharing my experience.

 

[Warren Sear]

And if you can, defer taking it until you are 70 as you then end up with about 7-8% per year extra from your start date (normal full payment say 66 years old so that would be ~30% more each check) that is added permanently to your SS pension. Dave_n

^^^ That right there!!!

If you are healthy, keep working. You will live longer!

 

[Mike SC Hunter]

Ya'll must be youngsters I got full benefits at 62...........As far as waiting till seventy.........Lots won't be here a t 70. So uncle suger gets to KEEP your money........Ya know what da say.....A bird in the hand is worth 2 in the bush

 

[HOUSTON RICK]

I do not know your individual circumstances, but I would guess that the message is wait. You get more more at first if you start early although the separate payments will be smaller the sooner you start drawing. The money that you get if you start early is money that you would not get if you waited, but if you wait, the individual payments are higher. I don't think the SS folks take taxes into account.

 

[zeke]

Collected mine early, not betting on being around when it pays off to wait. Plus when they keep pushing people to wait, there be some college edumacted gooberment worker that figured out they pay out less by getting people to wait. That, and health was bad.

 

[BAM-BAM]

If you look at the actuarial tables...... the total $$$s you will receive work out to be the same.

The only way you get "more" is if you outlive your life expectancy.

If you go early..... not so much.

But you spouse's....next ''companion"...... will enjoy a windfall!

I waited till FRA (66) ...... with 2 Boys in College I'm still working ..... but banking my SS.

 

[Bullet Bob]

"The SS considers you at full retirement age at January 1 of the year you turn 66"

The full retirement age (FRA) depends on when you were born. For people born in 1955 who turn 66 next year, it's 66 and two months. Currently, if your FRA is at age 66 (born in 1954), the earnings test (which is different than the monthly benefit amount) only applies from Jan 1 to the end of the month before you turn FRA. Let's say you turn 66 June 15th. The FRA earnings test (which is higher than the limit before your FRA year) for 2020 is $48,600.00; so for SSA earnings test purposes you could start receiving as of January 2020 if you weren't going to earn over that amount between 01/01/20 and 05/31/20.

 

[tops]

I did my own figuring and decided by starting at 62 I would be 75 to break even. I didn't think I would see 75. I'm now 78 so I messed up money wise but a few dollars a month more wouldn't make a difference in how I live so who don't care is me. Larry

 

[Bob L]

My wife applied and started drawing SS about 4 years ago and I waited until I hit 70. What I did not realize is that once my wife started drawing, I could apply and get 50% of her SS, even though I was still working full time. When I went in to apply, they told me that I should have been drawing off of her since she started. As it was, they back dated my claim on her for 6 months and got a nice little check. Should start getting my check next month and will be dropped from her's.

 

[Mike SC Hunter]

I do not know your individual circumstances, but I would guess that the message is wait. You get more more at first if you start early although the separate payments will be smaller the sooner you start drawing. The money that you get if you start early is money that you would not get if you waited, but if you wait, the individual payments are higher. I don't think the SS folks take taxes into account.

............See my post......

 

[TheHobbyist]

Ok, I am about to do math and the brain is going to hurt. Honest commentary, and I suppose I should get a financial calculator out but just recalled I lent my Texas Instruments calc to my nephew who never returned it...anyways

I wonder what the net present value of the money is that you collect as soon as you are able, versus the proposed 7%-8% increase if you wait until 70 (as mentioned above), and the risk factor of not knowing how many years you have past 70 (the inverse would also hold true, i.e., collect at 70 live to 100). Truly each case is unique, but assuming there is data on average life expectancy by demographic and then applying year over year net present value of $, versus that dollars worth in ~10 years, how much farther do you come out ahead on your own money?

Just a stream of consciousness. I'll show myself the door. Just thinking outloud, and genuinely curious, but apparently too lazy to find the answer haha.