Contacting SS in January of "collecting" yr. could yield big bucks! (benefit, tax)
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At least at this point, there's no reason to think this would be changed by the loopholes that were just closed -- since this isn't about suspending benefits, etc.?
Thank you, ilovemycat! I think I will go back outside and shovel some more snow...I live in Maryland. 😳
No, this has nothing to do with the spouse's category which is changing May and has changed two times in the last 10 years or so.
The benefit you will be getting is an "unreduced benefit". Not based on age.
Happy shoveling! This storm missed us in Maine, but we are still snow/ice covered due to two prior snowfalls.
ilovemycat, I have read this entire thread at least twice and just got off the phone with the SS 800 phone number and would like to know if the following is accurate or I screwed up somewhere cause it it is accurate I am applying tomorrow to start right now. I turn 66 in July 2016 (born July 1950) and that is my FRA and my monthly amount will be 1547. If I start now (Jan 2016) the amount will be reduced to 1495 a month. 1495x7 = 10465. 1495 x12 = 17940. 1547 x5 = 7735. Difference for 2016 of $10205.Divide that by the difference of $52 a month = 196.25 months or 16.35 years. So if I live to 80 I am ahead then I start losing $52 a month. And since I am still working the amount I earned in 2015 and will earn in 2016 will replace a couple of very low earning years at recalculation which is April or Oct of every year I work. Thank you.
ilovemycat, I have read this entire thread at least twice and just got off the phone with the SS 800 phone number and would like to know if the following is accurate or I screwed up somewhere cause it it is accurate I am applying tomorrow to start right now. I turn 66 in July 2016 (born July 1950) and that is my FRA and my monthly amount will be 1547. If I start now (Jan 2016) the amount will be reduced to 1495 a month. 1495x7 = 10465. 1495 x12 = 17940. 1547 x5 = 7735. Difference for 2016 of $10205.Divide that by the difference of $52 a month = 196.25 months or 16.35 years. So if I live to 80 I am ahead then I start losing $52 a month. And since I am still working the amount I earned in 2015 and will earn in 2016 will replace a couple of very low earning years at recalculation which is April or Oct of every year I work. Thank you.
The only part you messed up was multiplying by 7 months and 5 months. It really is 6 months and 6 months since in July you reach FRA.
So, by starting January, you gain 6 checks of $1495 = $8970.00. You lose $52.00, Divide $8970 by $52 and it takes 172 months or 14.3 years from July to make up the $8970.00 you could have had (if you decided not to apply tomorrow). Then only after age 80 and 3 months, are you "technically behind by the $52.00.
So, to me, it is totally advantageous to apply tomorrow and have that $8970.00, while you keep working. As you said, all high years will replace lower years, so 2016 earnings should give you a raise next year.
First thanks for starting this thread. I am sure it has helped a lot of folks here. It is very valuable information and your advice to each in turn has been good as well.
I have read this over a couple of times and have been trying to put it into the circumstances I find myself in. At this point it is moot since I am only 58 and I am being forced to retire. I will not find employment that will equal what I am now in my last days of work. I will however be compensated to the tune of about 100% of my income once my retirement income all comes in until I reach 62 then it drops to about 80%. This will be in just over 18 months from now. Of course none of that income will have anything to do with SS as I am not eligible to apply. I might have part time employment but probably nothing too serious or too steady. I have no other options because I was forced into retirement.
So projecting out to 2023 is almost pointless because things are subject to change. However hypothetically I would like to see. If I am a September baby which I am and the rules stay pretty much the same. Let's give a prjected FRA amount of $2250.00 which I think is pretty close to what is projected in my statement now for FRA. How will that affect my income and more importantly how would it affect my wife's? We are both the same age but she is an April baby and her FRA is 2024. Her FRA is probably looking to be $1950.00 per month.
Income wise we will both be essentially retired and doing part time employment though my wife has a better chance of finding a full time job than I would that would pay the same as she is getting now. Needless to say though we will survive from now until FRA on our (my compensation and our savings) income fairly easily. No mortgage helps in that as well as no or even just one car payment.
First thanks for starting this thread. I am sure it has helped a lot of folks here. It is very valuable information and your advice to each in turn has been good as well.
I have read this over a couple of times and have been trying to put it into the circumstances I find myself in. At this point it is moot since I am only 58 and I am being forced to retire. I will not find employment that will equal what I am now in my last days of work. I will however be compensated to the tune of about 100% of my income once my retirement income all comes in until I reach 62 then it drops to about 80%. This will be in just over 18 months from now. Of course none of that income will have anything to do with SS as I am not eligible to apply. I might have part time employment but probably nothing too serious or too steady. I have no other options because I was forced into retirement.
So projecting out to 2023 is almost pointless because things are subject to change. However hypothetically I would like to see. If I am a September baby which I am and the rules stay pretty much the same. Let's give a prjected FRA amount of $2250.00 which I think is pretty close to what is projected in my statement now for FRA. How will that affect my income and more importantly how would it affect my wife's? We are both the same age but she is an April baby and her FRA is 2024. Her FRA is probably looking to be $1950.00 per month.
Income wise we will both be essentially retired and doing part time employment though my wife has a better chance of finding a full time job than I would that would pay the same as she is getting now. Needless to say though we will survive from now until FRA on our (my compensation and our savings) income fairly easily. No mortgage helps in that as well as no or even just one car payment.
I am very sorry to hear of your forced retirement. It is one of the forces in the U.S. that has really had me upset. Previous recessions were when the baby boomer generation was much younger, and the one in 2008 really hit folks in their 50's hard. Even though we are not in recession any longer, and the stock market has made excellent gains, if your job or your industry is affected by downturns etc. you find yourself later in your position, which I know must be very scary. But, it does seem that at least a number of things, like low debt, are in your favor. And there are two of you so potential income from 2 even part time jobs is better than just one.
I would suggest you spend some time on AARP - Bringing Real Possibilities to Life. They seem to have a wealth of info and advice for folks in your age group. I also think that starting with a low paying job, even part time, but perhaps in a place where you have an interest or hobby, would do you a world of good. Lots of people never liked their job very much and always said to themselves, " oh, I wish I could work in ... You can fill in the blanks - selling car parts, something to do with golf equipment or working at a golf course ( I am using that because of your name)... It might lead to something better as time goes on, and you at least will be surrounded by an environment you enjoy. For me, it would be a gift shop or crafts or gardening.
In terms of SS, this thread might not apply to you if you and your wife need to apply at 62 + 1. Because a person must first hit age 62 (or 62 and one month) so there is no "January" that applies, at least with circumstances remaining the same.
If you do apply at 62 +1, (October, 2019) your amt. would be 72.92% of your FRA amount, which is $1640.00 a month, using $2250.00 as the FRA amt. Your gain is $1640 x 53 = $86920.00. Your loss is $610.00. It takes you 142 month or 11.8 yrs from age 66 + 6 to make up the $86920.00 you could have had, if you choose not to take it.
So, at age 78.2 months, you would break even, and then each month past that you technically are behind by the $610.00. But, in this case I don't look at it that way, because if you need the $1640.00 you take the $1640.00 and don't look back. Having a guaranteed $1640.00 a month is often a blessing.
For your wife, she hits 62 + 1 in May, 2020. Her amt then is 72.08% of her $1950.00 which is $1405.00 a month. Her gain is $1405 x 55 = $77275.00 to lose $545.00 a month. It takes her 11.8 years from 66 + 8 to make up the $75275.00 if she chooses not to take it.
I figured you are born Sept 1957, so your FRA is 66 + 6 which brings your FRA date to March, 2024.
Your wife reaches FRA at 66 + 8 which is December, 2024.
Now, if you decide to hold off on the SS and maybe between part time jobs etc. you are able to do so, then, this thread could apply. You reach FRA in March, 2024, so you could start in January 2024. Your wife reaches FRA in December, 2024 so she could consider January, 2024 as a start date as well.
In that case, your benefit is reduced by 2 months and you would be getting 98.89% of your FRA amt or $2225.00. You lose $25.00 but gain $2225.00 x 2 = $4450.00. Divide the gain by the loss and it takes you 178 months or 14.8 years to make up your gain, should you choose not to take it.
For your wife, if she begins January, 2024, she is starting 11 months early. She would receive 93.89% of her FRA amount of $1950 or $1830.00 a month. She gains $1830 x 11 = $20130.00 to lose $120.00. It takes her 167 months or 13.9 years from 66 + 8 to make up her $20130.00, if she chose not to take it.
But, 2024 is a long way from 2016. I wish you the best of luck and try to hang in there! Anything else, let me know!
Last edited by ilovemycat; 01-29-2016 at 08:33 AM..
Reason: typo
ilovemycat, thanks for informing us about our options. I have a few questions and a thought. In your original post you used an example of a person making 85,000.00.
When social security looks at the income for the year you reach FRA, is it only looking at earned income subject to SS taxes or do they add in non earned income such as interest and dividends, etc?
Do you ever get the payments that were withheld, because of the income, back?
Staying with the original income amount of 85,000 the additional money you receive from starting the draw in January is still taxable income. Since there will be some checks withheld I would guess that the amount of the checks withheld would not be included in taxable income for that year. Is that correct?
I filled out the SS worksheet on how much SS is subject to income tax to see how much tax each of those months would cost. Using a benefit of 2200.00 and a 15% tax bracket I would loose @ 280.00 a month due to taxes. You will still have more money in your pocket at the end of the year but the break even point of when the additional money, by starting early, equals the amount if you had waited until FRA will come sooner. Unless you have a lot of deductions, 85% of your social security will be taxed. The higher the tax bracket the sooner the break even point comes.
ilovemycat, thanks for informing us about our options. I have a few questions and a thought. In your original post you used an example of a person making 85,000.00.
When social security looks at the income for the year you reach FRA, is it only looking at earned income subject to SS taxes or do they add in non earned income such as interest and dividends, etc?
Do you ever get the payments that were withheld, because of the income, back?
Staying with the original income amount of 85,000 the additional money you receive from starting the draw in January is still taxable income. Since there will be some checks withheld I would guess that the amount of the checks withheld would not be included in taxable income for that year. Is that correct?
I filled out the SS worksheet on how much SS is subject to income tax to see how much tax each of those months would cost. Using a benefit of 2200.00 and a 15% tax bracket I would loose @ 280.00 a month due to taxes. You will still have more money in your pocket at the end of the year but the break even point of when the additional money, by starting early, equals the amount if you had waited until FRA will come sooner. Unless you have a lot of deductions, 85% of your social security will be taxed. The higher the tax bracket the sooner the break even point comes.
Yes, SS only looks at earned income, not investment income, when determining how the work and earnings test applies to a person from 62 until their FRA month.
When the year is over, SSA gets from your employer, or from your Sch C and SE on your tax return for the self employed, the actual amount of money you earned in the prior year. Now, you should prorate it for only the months pre-FRA.
If, Sherry's estimate of $85000 for the year, and $49583.00 for the pre-fra months was correct, SS would send her a 1099 to show how much of her SS benefits would be subject to tax in the year. Now, remember, the IRS and SSA do not count income the same way. SSA counts it when earned and IRS counts it when paid.
What that means is that the December, 2016 check is actually received in 2017 and would not be included when Sherry did her 2016 taxes in 2017. Also, if Sherry had overestimated her earnings for 2016 and in 2017, SSA saw they owe Sherry more SSA for 2016, that would be paid in 2017 and included when she did those taxes in 2018.
Now your point about 85% of the benefits SSA paid her would be subject to tax, that is true. Because, Sherry, as a single person, has 85% of the SS subject to tax if her income is over $34,000.00. The 85% is then paid at Sherry's tax rate, which we don't know.
Now, I know, that having income subject to tax, makes people rethink getting that income to begin with, but I personally don't understand it.
If Sherry's boss wanted to give her a raise from $85000.00 to $96000.00 (the equivalent of what SSA could pay her in 2016), does Sherry say to the employer "wait a second, I have to pay SS and Medicare tax of 7.65%, federal tax on 100% of it, state tax on 100% of it", so, no thank you- you can keep that $11000.00 because I don't want to pay more in taxes.
To me, I think that after a lifetime of work, if the rules are in your favor, and you don't have to change a thing about your life, meaning you can keep working and earning what you were earning, and because of your age and the amount of your earnings, the government will give you $11000.00, I think a person should take it. They then can decide how to use it and how it fits in with their overall situation.
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