Posted on 08/05/2009 10:59:43 AM PDT by Kaslin
Dear Carrie: I am planning to start collecting Social Security at age 66, since I fall in the age group from 1943 to 1954. Will I still be able to work without restrictions on the income I make even though I am receiving Social Security benefit payments? If I understand it correctly, there is no cap to my earnings at that point. Is that correct? -- A Reader
Dear Reader: Thanks for your question -- it raises a number of important issues for the millions of Americans who are approaching retirement. And for the benefit of other readers, let me start by explaining that the age you're talking about (in your case, 66) is what the Social Security Administration refers to as your "full retirement age" (FRA). Once we all reach our FRA (and that will vary according to the year in which we were born), earned income -- no matter how high -- will no longer reduce our Social Security benefits. But let's take a slightly broader view of how timing and earnings can impact your Social Security benefits.
First, just to be clear: You are free to earn as much as you like at any time during your retirement. So in that sense there is no "cap on earnings." But if you take Social Security benefits before you reach your FRA, you'll pay what can be a fairly hefty penalty for earning money above a certain threshold.
In 2009, if you are a Social Security recipient and have not yet reached your FRA, you can earn up to $14,160 with no impact on benefits. But above that modest amount, you'll lose $1 in benefits for every $2 earned. Then, in the year you reach your FRA, you can earn up to $37,680 (again, this is for 2009) free and clear, but your benefits will be reduced by $1 for every $3 you earn above that limit until you reach the actual month of your birthday. After your birthday (when you've reached your FRA), obviously, you can earn as much as you like without seeing your benefits reduced.
Another consideration is taxation of benefits. Regardless of when you retire, up to 85 percent of your Social Security benefit may be taxable if your IRS-defined modified adjusted gross income (MAGI) reaches a certain level. So be prepared for that if you're making a fair amount of money during your retirement. Your tax advisor can help, or refer to IRS Publication 915, "Social Security and Equivalent Railroad Retirement Benefits."
In many ways, however, the larger issue for Social Security recipients is not how much they earn, but when they start to take benefits. Start early (the youngest age is 62), and benefits will be (SET ITAL) permanently (END ITAL) reduced by up to 25 percent! On the flip side, waiting past FRA to start receiving benefits can result in a substantially larger monthly check. For example, if someone born in 1943 postpones benefits past their FRA, their monthly benefit will increase by 8 percent per year -- until the age of 70. After age 70 benefits top out.
So what does this mean in practical terms? Many people, especially those who live a long time, would receive more money over time by postponing benefits -- certainly to their FRA and possibly up to age 70. (Sadly, though, this is relatively uncommon: According to government statistics more than 70 percent of those receiving Social Security began doing so at age 62.) Of course there is no "right" answer for everyone, and personal circumstances will dictate the optimal time (if you need the money, you need the money!). But for many others, waiting is a better alternative, particularly if they're working and capable of supporting themselves with earned income or money from other sources. The "break-even" calculator at ssa.gov is a great tool for analyzing the choices.
As more and more of the boomer generation approach retirement, questions like yours are increasingly common -- and important. After all, the choices you make today will reverberate for, quite literally, the rest of your life.
Note: The Social Security Administration has lots of useful information to help you make decisions, including a number of simple calculators, which can be found at ssa.gov.
There was a thread about these a couple of months ago and most comments advocated taking SS at 62 if you were not planning to work after that time, even though the benefits would be reduced.
Heck, why not take the reduced SS amount at 62 and still work part time instead of working full time until you’re 67? As long as you don’t earn more than 14K, your benefits will not be reduced.
So I can retire at 62 and still earn another $14K. Geez, add the free healthcare Obama’s gonna give me and I can do pretty well. Now, if he would fill up my tank and pay my mortgage.................
I suspect that most people are drawing the rational conclusion that Social Security will collapse sooner rather than later, and taking benefits early rather than waiting eight years for them to bump up the retirement age yet again or slash benefits.
There's no apprehension here....I'll take what I can get for 5 years and consider that I at least got something on what was stolen from me...
This all assumes your life is in no way dependent on ANY medical care after age 65, because the tests to verify that you’re sick won’t be allowed, so there’s no risk of your receiving ANY expensive medical care to treat the illness.
If you take reduced benefits at 62, do they go up when you reach 66? Or are you stuck at the reduced amount forever?
My better half can’t find work and will be forced to take SS early. We are thankful that we have the option - even a reduced amount will pay the bills, we hope.
I believe there’s another strategy.
Start taking the money at age 62 and invest it.
At FRA, pay the money back, keep the extra interest, and get full benefits as if you didn’t take it early.
I am rapidly approaching age 62 and have contemplated taking my social security at that time. My rational for doing so is that if I delay seeking benefits for another 5 years, I run the considerable risk that social security, now going broke, will devise new ways to keep me working longer or deny benefits such as by means testing. I believe it would be harder for the government to take away a social security check I am already getting than devise new ways to keep me from getting benefits in the first place.
Shhhhhhhhh!
I have another 13 years until I get to reduced SS age. I fully expect them to bump the age up just as I get to it or means-test me out because I have been a good worker and saver, and after all, there are needier people than me.
I’d like to see confirmation of that. Don’t take it personally.
It’s a very nice strategy. It seems hard to believe that our blood sucking government would allow that.
I am on social security and took it at 62. If I remember correct it want up after I turned 65
No, they do not go up when you reach the age the government deems to be the “magic” age, except for any cost of living increases that apply to everyone else (the folks who don’t retire until 65, 66, 67, 68, etc. get their increased amounts, as well as the cost of living increases).
The one piece of information you need to make the right choice is to know how long you are going to live. If you’re going to live to 100, you’re better off waiting to 70 to start collecting benefits.
Which government health office do I call to get that piece of information?
People unclear on the concept...
Retirement is not the act of receiving social security payments. Retirement is the act of ceasing to work.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.