Social Security

Retire While Working

March 14th, 2012  |  Published in Social Security  |  5 Comments


Want an easy way to get your resources to stretch even further in retirement?

Work part-time while you’re collecting Social Security.

That’s PART-time — not the 40-hrs-or-more-a-week you used to put in as a working stiff. Just one or two days a week will not only add to your income, but done with care, won’t affect your Social Security benefits at all.

It all starts with determining retirement age…which depends on the year you were born. What’s full retirement age for you? Check this handy chart. But for purposes of illustration, this article will use “Fred,” a 58-year-old born in 1954. Fred can start collecting Social Security when he’s 62 — but his monthly benefit amount will be reduced:

  • at age 62, he’ll get 75% of the monthly benefit
  • at age 65, he’ll get 93.3% of the monthly benefit

But what if he’s putting in a few days of work a week, while he’s collecting early retirement? It won’t affect his Social Security benefits at all, provided he stays under $14,640 a year — a little more than $1000 monthly. Any higher, and Social Security will deduct $1 from the benefits check for each $2 earned.

The nicest part of all: if Fred can hold off collecting benefits until full retirement age (in his case, 66 years old), he can work as much as he wants — and still keep his full Social Security benefit.

This can get a little confusing — which is why Social Security has a long and comprehensive page full of Q&A on the subject. Some examples, too. (AARP also has a helpful site.) And there are some picky details worth noting. For example, if you’re working for wages, the money is counted when you earn it — not when you’re paid. If you’re self-employed, though, you only count the money when you actually receive it. Do your homework, and study the options before you make any final decisions.

This post is by Staff Writer Cindy Brick. You can read more of her writing at CindyBrick.com or her personal blog.

Social Security Ends Payback Option

May 16th, 2011  |  Published in Social Security  |  4 Comments

Last year I wrote about how you could take social security early and still receive the full benefit. The IRS has caught on to that option and is has established rules that keep it from being a viable option. The Social Security Administration published rules that limit the time period for beneficiaries to withdraw an application for retirement benefits to within 12 months of the first month of entitlement and to one withdrawal per lifetime. The SSA stated that it is changing its withdrawal policy because recent media articles have promoted the use of the current policy as a means for retired beneficiaries to acquire an “interest-free loan.” However, this “free loan” costs the Social Security Trust Fund the use of money during the period the beneficiary is receiving benefits with the intent of later withdrawing the application and the interest earned on these funds. The processing of these withdrawal applications is also a poor use of the agency’s limited administrative resources in a time of fiscal austerity — resources that could be better used to serve the millions of Americans who need Social Security’s services. Although it would be nice to have the payback option this does seem to be a smart move by the SSA.

The Future of Social Security

February 16th, 2011  |  Published in Social Security  |  3 Comments

The following is a post from staff writer Crystal at Budgeting in the Fun Stuff, where she writes about finding the balance between paying your bills, saving for your future, and budgeting for the fun stuff along the way.

Everyone knows that the United States Social Security System is in trouble, but nobody knows exactly how it will affect them.

The Social Security System is bordering on insolvency and will have trouble meeting its obligations going forward.  Last year, the federal government paid out more in benefits than it received in payroll taxes for the first time ever, and the Social Security is projected to run annual deficits going forward as well.

The President’s deficit commission and Congress are considering making sweeping changes to the Social Security program, but nothing is known for sure yet.  Unless the federal government performs a major overhaul, the Congressional Budget Office is forecasting that the entire system will be bankrupt by 2037 and anybody after that will have to receive their benefits only from what comes in from active workers.

What does this mean for you?

If you are under the age of 40, you really shouldn’t count on Social Security existing in its present form when you retire. Whether or not Social Security will be revamped, the program will not be in the same position as it was for your grandparents.  Here are some of the changes that may take place.

Means Testing

Means testing has been mentioned for Social Security over the years. This means that the amount of payments that you would receive from Social Security would be based upon your need for the money instead of it being based on how much you have paid into this system. Anyone with assets in a 401k plan or an IRA would receive lower monthly payments than an individual with no retirement plan whatsoever. Those with substantial resources would not be eligible for any payment whatsoever.  This system would be awful for me since we will have significant savings and retirement funds.

Pushing Back the Age of Eligibility

There has also been a lot of discussion about pushing back the age of eligibility to 70. Since more Americans are living longer, the thought is that they can work longer and/or save more for their own retirements.  Raising the age of eligibility would save the Social Security System billions of dollars but obviously means that Americans will have to work longer or save enough to cover the time between their retirement date and age 70.

Overall, senior citizens and current retirees should expect their benefits to remain in place, but younger individuals like me should plan their retirement around much lower Social Security payouts at a later date.

New Debt Proposal Would Cut Social Security and Medicare

November 10th, 2010  |  Published in General, Social Security  |  3 Comments

A new debt proposal from a fiscal commission appointed by President Barack Obama is proposing deep cuts in federal spending including Social Security and Medicare. The proposal also suggests significantly reducing income tax rates and eliminating practically all tax breaks such as the mortgage interest deduction. The plan also calls for raising the Social Security retirement age first to 68 and eventually to 69. Enacting the proposal is supposed to reduce the deficit to 2.2% of GDP by 2015.

Both Democrats and Republicans are already balking at different provisions in the proposal. You can view lawmaker’s reactions to the debt proposal here. Or you can view the actual debt commission report.

No Social Security COLA Increase in 2011

October 12th, 2010  |  Published in Social Security  |  5 Comments

According to several news sources it appears unlikely that there will be a cost of living adjustment (COLA) increase for Social Security in 2011. This would be the second year in a row without an increase. The COLAs are set automatically according to the Consumer Price Index for Urban Wage Earners and Clerical Workers. This index has been used since 1975 Since the CPI-W is still not at the levels it was in 2008 the measure does not call for increases to Social Security.

Many feel that the CPI-W does not accurately reflect inflation as it applies to the elderly. With Social Security already facing shortfalls it is doubtful Congress would adopt a different measure that would lead to more and larger increases in Social Security benefits. It is possible that there will be a special one-time payment of $250 if Congress passes a bill calling for one. A similar measure this year did not pass though.

On the bright side it is predicted that there will be sufficient inflation as measured by the CPI-W to lead to an increase in 2012.

Visit the Social Security website for more information on how COLA benefits are calculated.

Can You Collect Unemployment and Social Security?

September 8th, 2010  |  Published in Retirement, Social Security  |  6 Comments

With the unemployment rate being so high many people are wondering whether they can collect Social Security and unemployment benefits. The simple answer is yes. You can collect both unemployment and Social Security retirement benefits. However, in five states – Illinois, Louisiana, South Dakota, Utah, and Virginia – your unemployment benefits are reduced when you are receiving Social Security retirement benefits. Most of these have a 50 percent offset which means for every dollar in Social Security retirement benefits you receive your unemployment benefit is reduced by 50 cents. This could result in one’s unemployment benefits being reduced to zero.

Since many states are paying out a lot in unemployment benefits and are looking for ways to reduce their expenses it is possible that more states will pass offset laws. You should check with your state to see if it has an offset law.

Social Security Reform Ideas

June 17th, 2010  |  Published in Social Security  |  5 Comments

When it comes to the Social Security system, the only absolute facts are that changes must be made to keep it solvent. With the arrival of retirement age for the baby boom generation, the system will have two workers for every retiree by 2030; currently there are 3.2 workers per retiree paying into the system. With the well running dry, there are many ideas about how to fix the problem, and everyone has a strong opinion. There are three basic schools of thought, though with many variations as to how to accomplish each goal.

Raising Taxes

A highly unpopular option with cash-strapped Americans, raising taxes would fill the coffers. Discussions about raising taxes usually center on which taxes can be raised, and for which segment of the population. Raising payroll taxes is the worst case scenario, and instead deliberations have centered on eliminating loopholes in the tax code for wealthy Americans, and the possibility of reinstating estate taxes while earmarking the money for Social Security.
There is an additional element to these negotiations. Though hotly debated around the country, some point out that legalizing immigration could give the government the needed taxes to ‘right the ship’, and that we have plenty of workers to pay into the system if all of the undocumented workers are counted.

Reduce Spending

Other models have been suggested with reduced spending of the Social Security money. An absolute distinction between retirement money and other government money is essential, since surpluses from the system have often been usurped for other government needs.
Ways to reduce spending are certainly not fashionable either, because they usually are centered on lowering already low benefits or raising the age at which benefits can be collected.

Privatize

The third option is to privatize part or all of the system and allow each person to direct investments in stocks, bonds, and mutual funds for increased return on investment of their funds. This would enable future retirees to control the structure of their income and build a nest egg that they could use as they see fit.
Careful planning would be required to implement privatization, as there are a number of problems to consider. A few major considerations are current retirees or those near retirement age, and widows or children who depend on survivor’s benefits to live.

How to Take Social Security Early and Still Receive the Full Benefit

January 15th, 2010  |  Published in Social Security  |  1 Comment

There has been a lot of speculation about how long Social Security will be around and in what form it will be in the future. Figures vary but it is reported that the trust fund will start running at a deficit in 2018 and will be unable to pay full benefits by 2040. I have 22 years until I can file for Social Security so I decided to do some research on Social Security.

I was surprised to find out that you can file at 62 and still get your full benefit amount at age 70. With the uncertainties surrounding Social Security I would prefer to start getting my benefits as soon as possible. In order to get benefits at 62 and still get full benefits at 70 does require some work. The Social Security Administration allows you to “withdraw your application” for benefits at 69, reapply at 70, and get the same larger monthly check as someone who delayed taking Social Security until that age. The catch is that you have to pay back all benefits you have received. You won’t have to pay interest on the money though and you can get either a tax credit or tax deduction on any income taxes you paid on the Social Security.

This works if you are able to save and invest your Social Security benefits. Doing this gives you will roughly $20,000 in earnings if the benefits are saved at 5%. In addition to the extra $20,000 you will also have a significant increase in the amount of Social Security benefits. For those born after 1960 like myself there is a 77% increase in benefits from age 62 to 70. This option may not be around by the time I’m ready to file for benefits but for those retiring soon it is something to consider. For a more detailed look at the math involved visit the Retire Early Home Page.

*This post was previously published at TightFistedMiser.com

No COLA in 2010, Artificially High COLA in 2009

October 31st, 2009  |  Published in Social Security  |  1 Comment

While no one welcomed the news of no cost of living adjustment (COLA) in 2010 for Social Security recipients, I didn’t hear anyone complain about an “artificially high” 5.8% increase this year (2009). Artificially high is the term used in a NY Times article discussing the $250 Social Security bonus payment President Obama has discussed recently.

I thought that was an interesting idea lost in the discussion of Social Security COLA.