Social Security Question

Reply Tue 23 Sep, 2014 05:35 am
When I google this sort of question I don't find a simple yes or no.

If people take their SS at age 62, they pay a high penalty for working too many hours. When they pass age 65 nor 66, does that still hold. Do they continue to be penalized for working too many hours?
Reply Tue 23 Sep, 2014 07:04 am
The short answer is "No". If you are of full retirement age (which varies depending on your year of birth), you can work an unlimited number of hours and it doesn't decrease your SS benefit amount.

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Reply Tue 23 Sep, 2014 07:23 am
As I understand it, over the age 70 you can make as much as you want before being "penalized." i.e. taxed on the $$ you make over a certain limit.

(This is NOT SSID - this is regular retirement SS)
Reply Tue 23 Sep, 2014 07:27 am
Different SS question. Assuming you really don't require your SS check, at what age should you start taking benefits to maximize your likely payout? I've asked this to retirement advisors and just gotten a blank stare. I pulled up some actuary tables for general life expectancy and the SS tables for payout by age and I get around 68 as the optimum age, but that is likely to change over time as the law changes.
Reply Tue 23 Sep, 2014 08:05 am
Penalties and taxes are two different things. You are always subject to taxes no matter how old or how much you earn.

The penalty is an actual reduction in your monthly benefit check if you earn over $xxxx and you are under full retirement age.
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Reply Tue 23 Sep, 2014 08:11 am
There is no one-size-fits-all answer for that. Generally, later is better but everyone has to punch their numbers into a calculator and see where the chips fall for them. The longer you hold out the larger your monthly SSRI check will be but... how long will you live to collect it? I've seen a coupe of articles that seem to agree that the max lifetime payout amount for most people (those currently in their 60s anyway) is highest if they start collecting somewhere between 68 and 70 years old.
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Reply Tue 23 Sep, 2014 09:27 am
A person I know took his SS at 62. He is now 69. He is afraid he will be penalized for making too much money.
Reply Tue 23 Sep, 2014 09:43 am
If your friend is 69 then they would have been born in 1945.

Directly from the pamphlet I linked above:

If you were born January 2, 1943,
through January 1, 1955
, then your full
retirement age for retirement insurance
benefits is 66

If you work and are full
retirement age or older, you may keep
all of your benefits, no matter how
much you earn.

If you are younger than
full retirement age, there is a limit to
how much you can earn and still receive
full Social Security benefits. If you are
younger than full retirement age during
all of 2014, we must deduct $1 from
your benefits for each $2 you earn above
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Reply Tue 23 Sep, 2014 09:49 am
Thank you, sir. I am now confident I understand.
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Reply Tue 23 Sep, 2014 11:59 am
One additional consideration. Before your full retirement age, if your total income, including 1/2 the SS benefit, IRA withdrawals, dividends, and pretty much everything else exceeds a certain amount, 50% of the SS benefit becomes taxable. For the past several years, that amount has been $25,000. Anyone with that kind of income would be more likely to postpone the benefits till full retirement age - unless he had some reason to expect an early death, of course.

I'm not sure I said that clearly, but I'll try again later if it leaves some confusion.
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Reply Mon 10 Nov, 2014 10:14 am
I am 62 and I am going to retire sometime in the first half of 2015 but don't know exactly when. Besides the lose a dollar for every 2 I make over the limit, is there another draw back if I apply and then keep working my regular job making $6,000 a month? How does the SS dept know how much I make in any givin month? Is that something I report?
Reply Tue 11 Nov, 2014 09:53 am
How does the SS dept know how much I make in any givin month?

Your employer reports your earnings to both the IRS and SS every time you get paid (although some companies might do this monthly or quarterly depending in their size). If you are self-employed, you'd be reporting that Quarterly when you file your quarterly taxes and make your normal quarterly contributions.

And yes, there are other drawbacks. If you start collecting at 62 your monthly benefit check amount is reduced. That amount will never go to the "full benefit" amount.

So if you are making $6k/month, your check size would be based on an "early retirement" amount and then they are going to reduce your check by $1 for every $2 you make. Do the math:

$6k/month x 12 months = $72k/year
$72k - $15,480 (the SS baseline) = $56,520.
$56.520/2 = $28,260.

So your SS benefits would be reduced by penalties of $28,260/year.... which is probably more than your SS retirement benefit amount will be to begin with.

The net effect of all of that would be that your would get a month SS check of $0 and at the same time, you'd be reducing the amount of your monthly SS check for the rest of your life.

All of that is to say, it is a horribly bad idea to file for SS at age 62 if you are going to continue working and making that much money. The entire idea of a "retirement" system is that you, ya know, actually retire.
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