Contacting SS in January of "collecting" yr. could yield big bucks! (retiree, 10 year old)
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They said my amount would be $2351 a month as of June, 2015. Also, my wife is already receiving SS but only gets about $1000 a month. Will her benefit change when I start receiving benefits?
thanks again ILMC -- you are a big help
GrampaTom
So, June 2015 was the month you turned 66, your Full Retirement Age (FRA), so I will assume $2351 is your FRA amount.
First, let's deal with your spouse. To see if she is due anything more on your record, 100% of her own full amount (her amount at her FRA- her gross, before Medicare, and perhaps, not the amount she received when she began to collect), has to be less than 1/2 (50%) of your FRA amount, or less than $1175.50. If it is more, she is not due any more on your record, while you are alive. If it is less, she is due some more and should apply on your record. So, when you apply, be sure to have the interviewer look into this and be sure to ask what is her FRA amount.
Now, your amounts. If you apply effective January, 2016, you will receive 7 delayed retirement credits for 2015 so the $2351.00 will be $2460.00.
If you apply effective June, 2016, you will receive $2539.00 effective January, 2017. That is because, and now i am quoting from the SSA website: If you retire before age 70, some of your delayed retirement credits will not be applied until the January after you start benefits.
So, whenever you apply in 2016, you will get the 7 DRC's for 2015 and if you delay past January, 2016, in 2017 they will give you the additional 5 credits.
Ok, what do you gain by applying in January: you gain $2460 x 5 =$12800.00.
What do you lose? You lose the difference between $2539 and $2460 or $79.00.
Divide $12800 by $79 to see how long it takes you to make up the $12800.00 you could have had, and it takes you 162 months or 13.5 years from January, 2017 to break even. So, a little past age 80 you have made back your loss (if you decide to wait until June, 2016) and then each month you live past that, you are ahead by $79.00.
So, you have to weigh a number of things: Will the $12800.00 be something I can use for a specific purpose that will help me have a better retirement? (like, paying off debt or credit card balances). What are my chances of living past age 80? Will my spouse need that extra money (because if you predecease her, she then goes to 100% of your amount- including the extra credits).
Just a reminder: the $2351.00 was your amount before your 2015 earnings were used. So, when 2015 is over, you will get a "raise" or recomputation of your benefit to include your 2015 earnings. That is good.
Unfortunately, it doesn't look like there is going to be a SS COLA this year and just a warning to those that are paying Part B, but not collecting a SS benefit: it is likely, without a legislative fix, that the Part B premium will be rising to $159.20 a month. The Dems in Congress have a bill to try to address this, but you know how dysfunctional Congress is right now- so I wouldn't hold my breath!
I tried applying your figures to my situation, born in the same month as Sherry, but I have some questions. Is Sherry's income of $85K AGI, gross, or what SS says she made in 2014 according to SS's website?
We also have debts we would like to pay off, but at the same time, my wife is collecting SSDI (62yo) at an amount that is only a couple hundred less than what I will collect at FRA. If I die early on, she could benefit from me not taking SS early, since she would get my amount after I am gone. Something to consider. Sherry's situation seems to work out better for a single recipient than it does for married recipients.
Do you have a spreadsheet set up for these calculations? It might not be too difficult to create one where you input birthdate, last annual income logged by SS, and estimated FRA benefit.
Does it still make sense to file in January if you don't reach FRA until late December of that year. I am hoping to retire at 66 with a pension in December of 2020. Other details are that I will be making at least $135K that final year and my pension will be half of that amount yearly. Thank you so much for your help.
I tried applying your figures to my situation, born in the same month as Sherry, but I have some questions. Is Sherry's income of $85K AGI, gross, or what SS says she made in 2014 according to SS's website?
We also have debts we would like to pay off, but at the same time, my wife is collecting SSDI (62yo) at an amount that is only a couple hundred less than what I will collect at FRA. If I die early on, she could benefit from me not taking SS early, since she would get my amount after I am gone. Something to consider. Sherry's situation seems to work out better for a single recipient than it does for married recipients.
Do you have a spreadsheet set up for these calculations? It might not be too difficult to create one where you input birthdate, last annual income logged by SS, and estimated FRA benefit.
Sherry's income is self reported.
On applications, SSA asks: How much did you earn last year? A person, if a worker, answers from their W2 form, gross federal wages for the prior year. If more than one job, they add all the W2's together.
If self employed, they answer from their Sch SE where they report their net profit or loss from self employment from the Schedule C, and then use the figure from Line 4 of the Sch SE which gives them an extra deduction for their share of the FICA tax.
Then SSA asks: How much will you earn this year? You, and the interviewer, if applying in the office or by phone, try to figure a best estimate, again using your gross wages, including any raises you may be getting, or decreases if you got laid off or worked less hours or months, and not including any money you earn past your FRA date, if your FRA date was in the current year. Because, money earned beginning with the month you reach FRA does not count against your SS benefits.
Then, if applying in the last 3 months of a year for the next year (October to Dec), they ask: How much will you earn next year? Again, if "next year" is your FRA year, you only count the money earned "pre your FRA month".
So, in short, it is gross wages, not AGI, and not the SSA website- since that gives you a good idea of the past, but not the year they are considering.
You also must remember that changes in your estimate are totally possible and should be reported asap.
So, if a person loses a job they had when they applied, and therefore their gross wages are going way down, they call SSA and tell them a new estimate. Conversely, if they get a raise, big bonus, promotion etc and did not include that when they applied, they call SSA and tell them the new, higher estimate. You can do this over and over.
SSA also checks in with folks as the year is progressing, I am not sure they do so in every case, but I believe they do so in cases where the person indicated there were certain months they were not working.
I don't have a spreadsheet but I do use, from the SSA website (The United States Social Security Administration), "Early or Late Retirement?". Just put that phrase in their search box and it will bring you to the page. On that page you input your birthday, and then the month and year you are thinking of collecting, like January. It tells you what percent to add or subtract to your FRA amount.
When you said your spouse is on SSDI, did you mean SS Disability? Just want to be sure you are using the right abbreviation.
You are correct that widow's (if at FRA or older) when their spouse dies, go to 100% of what the deceased was receiving (sometimes a little more if the deceased started at 62), so if you delay, eventually your wife gets a higher amount, but sometimes the money you could get with January may help you more than the extra she will get later. That is a personal decision and really every person, married or single, or divorced, or widowed, etc. is different and their situations are different.
Does it still make sense to file in January if you don't reach FRA until late December of that year. I am hoping to retire at 66 with a pension in December of 2020. Other details are that I will be making at least $135K that final year and my pension will be half of that amount yearly. Thank you so much for your help.
Ok, so you are reaching 66 in December of 2020, meaning you are born December, 1954?
If so, your FRA is December and your FRA is 66. In your case, you take the $135,000.00, divide by 12 and multiply by 11. Your pre FRA wages would be $123,750.00.
Now, we don't know how much the work test will be in 2020- they haven't even announced 2016, so the only figure I can use is 2015. They will post 2016 on their website when it becomes available.
So, using 2015 limits, the first $41880.00 is subtracted from the $123750, leaving $81870.00. Then we divide $81870 by 3, since SSA doesn't care about $1 for every $3 you earn over $81870.00. That leaves $27290.00 they do care about and needs to be held back from your SS checks in that year.
I divided 27290 by 11 and got $2480.00. If your January 2020 SS check is more than $2480 a month, you would be due something. If not, you file 3 months before December and collect effective with your FRA month.
But, really, this is quite far in advance, so keep tabs on it as 2020 gets closer. Who knows what the work test might be by then.
Ok, so you are reaching 66 in December of 2020, meaning you are born December, 1954?
If so, your FRA is December and your FRA is 66. In your case, you take the $135,000.00, divide by 12 and multiply by 11. Your pre FRA wages would be $123,750.00.
Now, we don't know how much the work test will be in 2020- they haven't even announced 2016, so the only figure I can use is 2015. They will post 2016 on their website when it becomes available.
So, using 2015 limits, the first $41880.00 is subtracted from the $123750, leaving $81870.00. Then we divide $81870 by 3, since SSA doesn't care about $1 for every $3 you earn over $81870.00. That leaves $27290.00 they do care about and needs to be held back from your SS checks in that year.
I divided 27290 by 11 and got $2480.00. If your January 2020 SS check is more than $2480 a month, you would be due something. If not, you file 3 months before December and collect effective with your FRA month.
But, really, this is quite far in advance, so keep tabs on it as 2020 gets closer. Who knows what the work test might be by then.
Any other questions, let me know.
This is confusing me, the way you have written it. They don't care about the 1 out of 3 dollars, but then you say they do care about the 1/3 of the total of $81870.00. Can you restate that? I just want to make sure my calculations are correct.
This is confusing me, the way you have written it. They don't care about the 1 out of 3 dollars, but then you say they do care about the 1/3 of the total of $81870.00. Can you restate that? I just want to make sure my calculations are correct.
Sorry, I screwed up my sentence.
SSA does care about $1.00 for every $3.00 of the $81870.00. So, you divide the $81870.00 by 3 to see how much they do care about.
Also, does it make any difference if Sherry continues to work past the end of the year to pay off more debt or put some money away in savings?
Any money that Sherry earns from August of her FRA year, does not hurt her, it only helps her. If that year, or the next year, or any year thereafter is considered a "high year"- meaning greater earnings than an earlier year used in the computation, it will be put in and a "low year" taken out. Meaning the difference between the higher year and the lower years earnings.
But, if Sherry did not have 35 years of earnings (which is what SSA uses in retirement computations) they would take a zero and put in her entire amount.
Keep this in mind: SSA indexes all earnings for years up until the year you turn 60. Indexing means "what are these earnings worth in today's dollars?' From age 60 on, they only use your actual earnings.
So, 35 years ago (if a person had no zero's) brings us to 1981, where the most SSA taxed someone was $29700.00. But SSA doesn't use $29700.00- it uses "what is $29700.00 worth today?" which could be over $50000.00.
So if Sherry in 2016 earns $65000.00, they would take out $50000.00 and put in $15000.00- the difference between the indexed lower year and the higher actual year.
It would give her a slight raise since she had her 35 years. If she had zeros in there, the raise would be significant.
The raise is reflected effective January of the year following the year of earnings. SSA does this automatically later in the year and sends the person the retroactive benefit difference. Some people choose to bring in their W2 to the office when they get it and ask for the recomputation earlier in the year.
SSA does care about $1.00 for every $3.00 of the $81870.00. So, you divide the $81870.00 by 3 to see how much they do care about.
Wait she is at FRA of that year. She files 3 months early and her first check will come in Jan. What difference does her income of the previous year mean. She is not restricted by any income amounts in FRA and her filing during the year for SS after FRA has no bearing. That is the way I read the SS handbook.
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