Your Social Security Advisor

Social Security’s Earnings Test – Ask Rusty

earnings money cashDear Rusty:  I’m 62 and still working but would like to get Social Security because we could sure use the extra money.  I’ve heard that if I keep working that my Social Security benefit will be less, so now I don’t know if I should go ahead with my Social Security or just wait.  I sure don’t want to lose money on my Social Security for the rest of my life.  Signed:  Perplexed

Dear Perplexed:   Social Security rules for when you continue to work after your benefits start can be confusing.  Social Security calls this the “Annual Earnings Test”.  The basic rule is that you can continue to work after you start collecting Social Security but, depending on how much you earn, they will reduce your benefit payments if you haven’t yet reached your “full retirement age”.  But here’s a key point:  You don’t actually lose the amount they will take away, because when you reach your full retirement age (in your case, 66) your Social Security benefit will be increased to account for what they withheld.  Here’s how it works:

If you’re working and collecting Social Security while you’re age 62 through 65[1], your benefit will be reduced by $1 for every $2 you earn over $16,920[2].  In other words, they’ll take back half of anything you earn over $16,920.  In the year that you become age 66, you can earn up to $44,880, after which they will reduce your benefit by $1 for every $3 you earn over $44,880 (one third).  Once you reach your full retirement age of 66, you can earn as much as you want and there will be no benefit reduction.

The way that Social Security gets back what you owe them is by withholding your benefit payments the following year, for as many months as needed for them to recover what you owe from over-earning the previous year.   That means that you won’t receive any Social Security payments for one or more months the following year until they recover what’s due.  Losing those payments can hurt, but don’t fret too much because when you finally reach your full retirement age your benefit amount will be recalculated eliminating those months when your benefit was withheld because you exceeded the earnings limit.  You don’t actually get back the dollars that were withheld due to your over-earning, but rather a formula is used to recalculate your benefit when you reach your full retirement age.  And here’s how that works:

If you start collecting benefits at age 62, your benefit will be reduced to about 75% of what it would be if you waited until your full retirement age of 66.  But because you didn’t actually collect benefits in those months you were paying back what you owed due to over-earning, they will give you time credit for those months as though you didn’t begin collecting at age 62, but rather an age later than that – 62 plus the number of months they withheld your benefits due to over-earning.  For example, if your over-earning caused them to withhold your benefits for 3 months of each of the 4 years until you reached your full retirement age, when you reached 66 years of age they would recalculate your benefit to be what you would get if you began collecting 12 months later than you actually did (3 months per year without benefits for 4 years equals 12 months).  So, starting at your full retirement age of 66, your benefit amount would be adjusted to what it would have been if you had started collecting at age 63, which means that you would be collecting 82.22% of your full benefit instead of 75% – an increase of about 7.22%.

So, if you need the money and want to start collecting at 62 but also want to continue working, you can do that.  Just be aware that when you exceed those earnings limits, they will withhold your benefits the following year(s) until they get back what’s due them.  But, when you reach your full retirement age, your benefit amount will be increased so that that you will eventually get back the money they withheld.  And, that benefit increase at full retirement age will last for the rest of your life.

Article By – Russell Gloor, AMAC Certified Social Security Advisor

The information presented in this article is intended for general information purposes only. The opinions and interpretations expressed in this article are the viewpoints of the AMAC Foundation’s Social Security Advisory staff, trained and accredited under the National Social Security Advisors program of the National Social Security Association, LLC (NSSA). NSSA, the AMAC Foundation, and the Foundation’s Social Security Advisors are not affiliated with or endorsed by the United States Government, the Social Security Administration, or any other state government. Furthermore, the AMAC Foundation and its staff do not provide legal or accounting services. The Foundation welcomes questions from readers regarding Social Security issues. To submit a request, contact the Foundation at [email protected].

[1] The amount of reduction may not be the same the entire time you are 65 years old, because it changes for the year you reach your full retirement age of 66.  

[2] These earnings test amounts are for 2017.  They change annually to account for inflation.

 


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Virginia Graves
5 years ago

My husband passed away in 2015 when I signed up for his ss $100 was taken. for insurance.Why? The insurance was already taken when my husband signed up .

maria costa
5 years ago

I SEE MY POST HAS BEEN DELETED i GUESS THE TRUTH IS NOT PERMITTED ON YOUR SITE, SO MUCH FOR THE FIRST AMENDMENT. WOW YOU GUYS REALLY ARE PAID REPUBLICAN SHILLS.HOW DISGUISING TO LIE TO OLD PEOPLE AND LEAD THEM LIKE LAMBS TO THE SLAUGHTER. i KNOW YOU WILL DELETE THIS BUT DO ME A FAVOR SEND IT TO THE HEAD GUY AND TELL HIM TO GET IN TOUCH WITH ME.

maria costa
5 years ago

Yeah this is not what AMAC is telling you , you’d al better wake up the republicans want to destroy SS and gut medicare so we will have to go out and find private insurance, fat chance, they won’t cover old people or ones who are sick unless you can afford sky high premiums for 70/30 coverage and $10,000.00 deductibles. Especially without any Social Security income all they want are the trust fund to cover the tax cuts for the 1 % and I;m pretty sure that’s not the bulk of AMAC members. Even this guy wants his SS to supplement and he is still working. I have friends with a good a pension, but that SS check makes life a lot better. Well if the republicans have their way, that will end and a lot of seniors will be living with family or out in the street. It’s wrong not to talk about this stuff and be vigilant as to what they are planning. We are the strongest voting block and no one is going to help us but us. I’ve learned to do my own research and call any congressman or senators I need to to let them know we are out here and not to mess with us and we can stand up and fight for ourselves and each other. Senior their are approximatly 56 million of us and they think they can go after us. Well we need to let them know mess with us and we will go after you !!!!
Social Security payroll contribution key, but cuts proposed
April 19, 2017
by Diane Archer
2 Comments
photosteve101
photosteve101
Written by Diane Archer

Last week, the Associated Press reported that President Trump’s team is considering ending or cutting the Social Security and Medicare payroll contributions as a way to “help” working class Americans. But, these payroll contributions are key to ensuring health and retirement security for working Americans. Cuts would put Social Security and Medicare at risk.

As Michael Hiltzik points out in an opinion piece for the Los Angeles Times, payroll contributions protect Medicare and Social Security from political attack. In Franklin Delano Roosevelt’s words, ““We put those payroll contributions there so as to give the contributors a legal, moral and political right to collect their pensions. … With those taxes in there, no damn politician can ever scrap my social security program.”

Payroll contributions from every worker for Social Security and Medicare turn these programs from welfare programs–which never cover all the people eligible, let alone in need of them–into social insurance programs with earned benefits for everyone. Payroll contributions allow the Social Security Trust Fund to cover the full costs of Social Security benefits. Social Security pays for itself, without dipping into general revenues or contributing to the deficit.

If Social Security contributions were eliminated or cut significantly, Social Security benefits would need to come in whole or in part from general revenues. A Congress committed to gutting Social Security could easily do so by cutting taxes and reducing revenues or reallocating monies away from Social Security to different priorities.

Even with Social Security having the monies needed to pay benefits for the next 17 years until 2034, Congressional leaders argue that Social Security is “unsustainable” and needs cutting. At the same time, a majority of the public supports Social Security expansion, including lifting the cap on Social Security contributions to ensure Social Security’s ability to pay benefits over the next 75 years.

Social Security is needed now more than ever to ensure the economic and retirement security of Americans. If President Trump were listening to the people who supported him, putting aside the people who did not, he would know that we should be expanding Social Security benefits, as 157 House members have recently proposed. We need to increase Social Security benefits and lift the cap on contributions–now at $127,200–so that the wealthiest Americans contribute to Social Security at the same rate as everyone else.

If you want Congress to expand Social Security, please sign this petition.

Barbara Rochester
5 years ago

Although the article is a bit technical, it is one of the best I’ve read on the subject. I would add one thing and even that is a gamble: if your health is poor, and you cannot work, then take the earlier retirement. I worked until full retirement age and struggled the last 2 years–but I expected to live long enough to compensate for the money I didn’t get by retiring early and maybe dying early. There are calculators on the SS website (and I think other places) that compare the return to you for whatever time you choose to retire. Some who would not expect to live until really old age might gamble and take the earlier retirement. Still, you have to save on your own. I favor having people opt-out of a 401K or 403B instead of opting in. Statistics show that more people will save more that way. Like many people, we didn’t get serious about saving until our 40’s, shame on us. And, we work still as Assistant Apartment Managers, low pay but easy job. I read that if you can supplement your retirement income by 4%, it is the same as having another $500K saved. We have earned that for an extra 10 years in retirement.

WR Miller
5 years ago

Why ask Rusty! He never replies anyway.

Rusty
5 years ago
Reply to  WR Miller

Au contraire, WR. We reply to all emails and phone calls as soon as possible, usually within 24-48 hours. Please contact us at [email protected], or by phone at 1-888-750-2622, with any Social Security question you may have. We’ll be glad to help.

Mona Marche
5 years ago

When I was in nearing age 60, I got a statement from SS that “If you retire now, your payment will be….” It was in the $400’s. I retired on my 65th birthday. I get in the low $300’s. I even had to pay them back because they said they erred. I was off work for many months due to injury and illness. Did that affect the amount I was “awarded”? It is so confusing!!!! I am not eligible for SSI as I receive a pension from another source. Why is it so confusing? How do they figure it for each person?

David
5 years ago
Reply to  Mona Marche

The amount on the statement you got was an estimate, based on the assumption that you’d continue working and drawing at least the same income until your FULL retirement age.
If you took time off work in the intervening years, that reduces your average income, and most certainly does affect your SS calculation.

Rusty
5 years ago
Reply to  Mona Marche

Mona, if you would like to speak directly to one of our Certified Social Security Advisors to understand how your benefit is calculated, please email us directly at [email protected], or phone us at 1-888-750-2622. We’ll be happy to assist you with understanding your benefit.

Irv C
5 years ago

Trump said he’d increase SS. I got a $4 a month raise yet they increased my Medicare $4 a month. I worked and paid in 50 Years. For what? So my country could “F” me!

Irv C
5 years ago

Trump said he would increase SS. A lie? I got a $4 a month raise this year and they raised my Medicare $4 a month. What BS. I worked and paid in 50 YEARS!!! So they can screw me and my fellow US CITIZENS!!

Donna Berry
5 years ago
Reply to  Irv C

Whoa Irv C – give him time to make good on the SS benefits. What you and all of us have been dealing with for 8 long years and even at the beginning of this year was all OBAMA. I understand your frustration because I’m in the same boat as all of you drawing SS but as Judy posted above – so much of the SS $$$ have been going elsewhere, not to the working people that paid into this system all of our working lives. Trump has only been there a few months, he’s not to blame for this.

Tad
5 years ago

“………they will withhold your benefits the following year(s) until they get back what’s due them.” Due THEM?? It’s OUR money!

Judy
5 years ago

Soc. Sec. “REDUCED????” What a crock. “We” have NOT received ONE PENNY of an “increase” in AT LEAST SIX YEARS that I can recall………why?
I’m convinced it’s because all of our “raise” is going to all the ILLEGALS / IN-BREDS / ETC. who want to wipe out this country & turn it into something
more horrible than imagination can possibly come up with … AND ALL OUR … WORKED FOR “BENEFITS” … ARE GOING TO THEM ………… FOR FREE !!!!!
Excuse me? Anyone wonder why our commie congress got OUT of unaffordable care(?) within hours of “opening it” – THEY KNEW 8 YEARS AGO IT WAS
A DISASTER! Uh huh. They need to be replaced too!

Adelheid
5 years ago
Reply to  Judy

Let me set you straight on this ,Miss fancy pants Pelosi the Witch made sure when she was up on her Pedestal that we are not to get any Raises for the next three Years ,because she needed the Money to be flown to San Francisco on a full size Jet that did not need to come down to fuel up ,but go straight from Wash.DC to San Francisco ,so she could take her Brake (long Time) to watch her Grapes grow in her Orchards ,plus go to Town hall Meetings to invite more Illegals in to the USA ,plus go for her Botox Shots daily ?? Just like She said they Demograts had to pass Obama Care so they could find out Whats in it ,for the Politician are not on that Healthcare

Art
5 years ago
Reply to  Adelheid

And for those of you who didn’t know, we the TAX payer pay for the jet.

Mona Marche
5 years ago
Reply to  Judy

It “used to be” that illegals and non-citizens (?) couldn’t collect Social Security. I remember, many years ago, trying to qualify for SS. I had to fulfull and qualify in a number of ways. A Vietnamese couple came in to get SS for the mother who was “in the hospital and can’t come in person”. I had to go in person, as told, but this woman, not a citizen, got to have someone else come and apply for her and witness the “X” that SS said she could use to sign??? She was told her mother would get right onto it. I had to wait….and wait…..They sent me for a physical many miles away and I didn’t even have the $5 for parking!!! To get to the point, I like what you said and the way you said it, Judy!!!!!

Sandy Green
5 years ago

Is it true that when I turn 66 years old, which will be December of this year, that I can also get extra money on SS from my x-husband? We were married 18 years and he has never remarried. We have 3 grown children together. He will be 70 this year.

Rusty
5 years ago
Reply to  Sandy Green

Sandy, if your benefit as an ex-spouse is more than your benefit on your own work record, you would get a “spousal boost”. If you would like to discuss your situation with us directly, please email us at [email protected], or phone us at 888-750-2622.

Aardvark
5 years ago
Reply to  Sandy Green

I believe the way the law is written, you are only entitled to receive his SS payment in place of your own, and only if he has died. That way, if he died, you could choose between the higher amount. I don’t think you can receive both in any circumstance except if you still have dependent children from your marriage living with you. Double check at: https://www.ssa.gov/planners/retire/yourdivspouse.html

Kim
5 years ago
Reply to  Sandy Green

Sandy-
There is something called the “spousal add-on”, which applies to divorced people who have been married at least 10 years and are 62 by the end of 2015.
When I inquired at a Social Security office a couple of years ago, they never told me about this grandfathered clause in the law, which, if I decided to start collecting SS, would add a few hundred dollars each month to my share, one financial planner told me. As long as you and your X are at least 62, and you are single, you can collect, regardless of his current marital situation. Ask around before you commit to a plan.

Russ
5 years ago

I asked Rusty, never heard back!

Rusty
5 years ago
Reply to  Russ

Russ, we answer all questions, usually within 24-48 hours. Send your question to us at [email protected], or call us at 888-750-2622

Joe Welsh
5 years ago

We have a friend who is on disability income and does NOT work. She will be 62 in October 2017. Will her Social Security disability benefits be increased at age 62? Thank you.

Rusty
5 years ago
Reply to  Joe Welsh

Joe, there are a lot of possibilities (ifs) in this question. Please call us at 888-750-2622 or email us at [email protected] and we can get the information we need to answer your question.

Tad
5 years ago
Reply to  Joe Welsh

I just turned 62 and mine didn’t decrease (yet), but my Medicare payments went up, so my check was less. I guess that happened to everyone, though?
I can’t find out if there’s a difference between getting with a disability or as regular SS, though. If you find out, please let me know.

Rick Traskos
5 years ago

The key to a successful retirement is to maximize your retirement income. Taking 75% at 62 because you need a little help overlooks taking 132% at age 70 when you are retired and need a lot of help. It is sad to watch our 70+/- year old friends start to run out of money. In most cases, you will live longer than you expect and will need every extra dollar of income you can find just to pay the raising food, tax, and energy costs. The average social security check is approaching $1,500. 75% of this would equal $1,125 at age 62 or you could have $1,980 at age 70. Ask any retired person what an extra $100 a month would mean to them let alone waiting until 70 to have an extra $855 a month which is $10,260 MORE annually . Of course not everyone can wait until age 70 but even waiting until age 67 could give you an 8% increase or $1,440 more a year. These higher payments will also mean higher inflationary payments each year an adjustment is made. On a monthly basis taking early payments may not look to painful, but look at the annual loss, then the loss over the next 10 or 15 years. Trust that you will need more not less just to get by.

David
5 years ago
Reply to  Rick Traskos

I’m not depending on SS for my retirement, as I have saved and covered that privately.
I plan to retire in my late 50’s, and take my SS as early as possible while I’m still healthy enough to enjoy it.
When I’m 70 and unable to get out and DO anything, there won’t be much point in having a huge income.
My Mom is in a similar situation. She’s 81 years old and there’s no way she could spend her entire income. It’s great for my inheritance, but sad to see her losing her mobility and cognitive ability. I thank God every day that she’s kept her great personality, and is still happy.

Bob
5 years ago
Reply to  David

David: You said, “When I’m 70 and unable to get out and DO anything, there won’t be much point in having a huge income.” You need to read the post from Rick Traskos. As he noted, “In most cases, you will live longer than you expect and will need every extra dollar of income you can find just to pay the raising food, tax, and energy costs. “. It’s not a matter of what you can or cannot do at age 70, 80, 90, etc. It’s a matter of whether you can afford your lifestyle or not. In other words, if you’re healthy, will your income support the activities you want to pursue? On the other hand, if you’re incapacitated or in assisted living, will your income support the healthcare and other related necessities you need to support daily living? Finally, as far as having too much income left over, I contend that there is no such thing. People simply need to have their estate planning documents taken care of so that if they do leave something behind, they can be a blessing too those family members, friends or organizations that can use it.

Tad
5 years ago
Reply to  Bob

Yea, and then you have situations like my Mom who worked her whole life and died right after turning 64 and got nothing. It’s all a toss of the dice.

Aardvark
5 years ago
Reply to  Tad

As is all of life.

Tad
5 years ago
Reply to  Aardvark

True, but when you work all of your adult life, you expect that others will be good stewards of the monies that you give to them…esp. the govt. That will NEVER happen.

Bob
5 years ago
Reply to  Tad

Tad: You bring up a good point. In a case like that, it would be great if the government would be required to give the estate of the deceased an amount equal to what the deceased would have been given in SS benefits had they lived from the time of their death to the average age that women live (or men if the deceased is a male) in America. Since government seems to run on the idea of spending more than it takes in, my suggestion probably isn’t workable.

Perhaps a more realistic idea would involve having the government use SS benefits that aren’t withdrawn due to death to fund medical care for low income individuals /families and those with pre-existing conditions.

Tad
5 years ago
Reply to  Bob

Bob, it is disheartening to know how hard my Mom worked and lost it all. She was a giving person (being a nurse), and I’m sure that she would have had no problem with her funds going to help those who need it if my brother and myself couldn’t have it.
However, knowing the history of SS and how the govt. stole the money to put in the general fund, I doubt that they would ever do anything to use it to help others, much less let the family have any of it. Good ideas, though. I wish it could be so.

David
5 years ago
Reply to  Bob

My point is, my investment income will support our lifestyle in retirement and then some. My wife and I have insurance to cover long term care if either of us needs it.
With no debt, and likely more income in retirement than when working, I see no point in waiting to claim SS. More excess income later on isn’t needed, as I see little joy in watching my bank accounts grow from a nursing home bed. No kids, so I don’t have anyone to leave it to when I’m gone.

Barbara Rochester
5 years ago
Reply to  David

And David, my guess is that you were financially savvy, saving along the way, and living below your means all your life. Some don’t think about tomorrow, or not enough, and use up all their money, so have no savings at retirement time, and not enough info about SS to realize it won’t support much of a lifestyle.

Connie Perrin
5 years ago

Of course, at full retirement, your social security is still reduced, technically, if you work; because they tax it. It was a tax to begin with; and now, they tax it again. AMAC needs to work to remove the tax on Social Security earnings.

maria rose
5 years ago
Reply to  Connie Perrin

How about raising the maximum income allowed to not get taxed to a more current level. The amount set of $25,000 was set back in the 1980’s when that was a comfortable level of income. Getting taxed at $31,668 puts one at below poverty level net income, especially when your Social Security is at high end benefit level . Adjust maximum to cover this level.

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