My birthdate is June 5 1954. I will retire from teaching on June 30 2016. I planned on taking SS when I retire. Are you saying I should wait until Jan. 2017?
Thanks.
QUOTE=ilovemycat;39189188]Many people, when pondering when to begin to collect their Social Security benefits, usually think about the month they turn Full Retirement Age, or the month they turn 62, or possibly their birthday month, or their work anniversary month (35 years on a job), etc. as the month they are going to apply for their checks.
They contact SS 3 months before that month or apply on the internet a few months before their chosen date.
I want to explain how, if you know in advance when you would like to retire, how picking January of that year might yield you thousands or even tens of thousands of dollars in extra benefits.
Certain milestones, like the year you hit 62 or 62 +1, are cut and dry. Because you are not eligible before that age, you must wait for the birth date month.
Or, those who work and make hundreds of thousands a year, well, they have to wait for their FRA month, when the amount they earn no longer counts against receiving a SS benefits, because they make too much before that month.
But, for the vast majority of folks- even those who earn $100,000 in their FRA year, they have more possibilities.
Let's go through it with Sherry, a working, now single (previously divorced) woman.
Sherry is turning 66 in August, 2016, meaning she is born in 1950. She works and earns $85000.00 a year but hates her new boss and wants to retire at the end of 2016. She is worried about her debts. She knew that beginning in August, she can work and make as much as she likes and was planning to apply 3 months before her birthday and her FRA month, May, 2016.
But, in the year you reach Full Retirement Age (FRA), SS has a very liberal work test, meaning people can work and earn quite a bit of money and still receive benefits.
In that year, SS only cares about the earnings you made before the month you reach FRA. So, for Sherry, that means January through July. Let's see how much she made in those months: $85000 divided by 12 = $7083.00 per month. Times 7 months = $49,583.00.
Also, in 2015, a person reaching FRA can earn $41880. and still receive all their benefits. We don't know how much it will be in 2016, so let's use the 2015 limits, knowing 2016 will be even higher.
From Sherry's $49583.00 SS doesn't care about the first $41,880.00, so we subtract it. That leaves $7703.00. Then SS does not care about $1.00 for every $3.00 you earn over $41880.00 so we divide the $7703.00 by 3 to see how much SS does care about. That leaves $2567.00 that Sherry is over the SS work limit for 2016. So, from her original $85000.00, SS only cares about $2567.00!
Note that the $1 for $3 is only in the FRA year. If you want to do this pre-FRA, it is $1 for $2, and a much lower limit ($15720).
Ok, now, how much is Sherry's check? Well, (I used fictitious, but plausible amounts from
Quick Calculator) in August, FRA month, her benefit is $1973.00. But, we are looking at January, 2016, when she is 7 months younger. Her check that month is reduced (initially, but not permanently) to $1896.00.
Remember, SS has to withhold $2567.00 from Sherry's checks for the year. The way they do that is withholding your check, month by month, starting with your filing month. In Sherry's case, that is January's check, $1896 and then February's check, $1896.00. In her case, they are done withholding by February and they actually withheld more than they had to. SS initially withheld $3792.00. They will even it up later. SS can now pay Sherry every check beginning with March, 2016.
That is March, April, May, June, July, @ $1896.00 which totals $9480.00. Of course Sherry will also get August to December, but she already knew that. (because she reached FRA in August and was allowed to work and earn as much as she wants and still get those months).
What happens next? When 2016 is over, SS evens up the record. When they know exactly what Sherry made pre-FRA, they either pay her the difference between the $3792 and the $2567 = $1225.00, if her estimate was spot on, or if she underestimated, they might have to withhold more. If she overestimated, they owe her more.
The next thing that happens is to her reduction month calculation. Remember, to get Sherry her $9480.00 (plus possibly another $1225 -totaling $10705.00) SS reduced her benefit by 7 reduction months, the 7 months she was under FRA in January.
But, Sherry didn't get 7 checks pre-FRA, she got March, April, May, June, July, = 5 months. So, they recalculate the reduction factor to only permanently reduce her benefits by the 5 full months she got checks. SS does not care about the partial month check Sherry received in February.
So, going back to Sherry's FRA amount of $1973.00, 5 retirement reduction months is $54.75, leaving a permanent SS benefit of $1918.00.
For a reduction of $54.75, Sherry gained $10705.00. We divide the loss into the gain to see how long it would take Sherry to make up that $10705.00. It takes Sherry 195 months or 16.2 years to make up that $10705.00 if she chose not to take it, or called SS in May, 2016 (3 months before her birthday) instead of January of that FRA year.
Sherry was thrilled and is going to use her "new found money" to pay off some (or all) of her debts and be well on her way to a more secure retirement. (or whatever-I am just presenting information).
I hope you find this helpful and informative. I know everyone and every circumstance is different, but knowledge is power![/quote]
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not sure i understand??
