Any Social Security Experts???

[mom2alix]

MIL turned 65 last November. She is planning to continue working, but wants to go ahead and start drawing her SS checks. She reaches full retirement age this Sept. Should she be contacting the SSA now to start getting things set up? Is there anything else we should consider that we haven't thought about?

She has asked me to help her invest the SS money so she will have it when she does finally quit working. Can she put that money into an IRA?

 

[fkj2]

Has she enrolled in Medicare? If not, she needs to.

And you asked about putting the SS into an IRA. If/when she stops working, how will she pay her monthly expenses if she's not planning to use the SS?

 

[disneyfreakk]

Keep in mind that she will have to pay taxes on the SS, which may put her in a higher tax bracket if she collects while she is still working.

 

[mom2alix]

Has she enrolled in Medicare? If not, she needs to.

And you asked about putting the SS into an IRA. If/when she stops working, how will she pay her monthly expenses if she's not planning to use the SS?

She is planning to use her SS check for living expenses once she stops working. But for the next few years, while she still has a paycheck and is also drawing SS, she is looking to invest that "extra" money so she will have more of a cushion once she no longer works.

 

[mom2alix]

Keep in mind that she will have to pay taxes on the SS, which may put her in a higher tax bracket if she collects while she is still working.

Very good point! Thanks for pointing that out, I hadn't considered that. Between that and how much more she could get per month by waiting to draw her SS, it might make more sense to wait.

I knew folks here would get me thinking about things I hadn't considered before!

 

[runwad]

OP I'm no expert but have some coworkers getting close to that magical age and looking into Social Security. One thing I've heard them mention is once you reach full retirement age you can collect SS and make as much as you want at your job. Before full retirement age if you draw, I believe, you can only make 13k in additional income w/out incurring any tax penalties. Something for your to check out as I said I'm along way off from there.

 

[Cheshire Figment]

As long as she is still working she should avoid getting her SS. There are several reasons for this. She might want to talk to someone at Social Security for more information and specifics related to her.

One is that Social Security payments are related to the high 35 years of adjusted earnings. If she is getting good income now this will build up her average earnings which will increase the monthly payments.

Another is that for every month that she defers starting SS after Full Retirement Age (I believe up to Age 70 or 72) they will increase her payments by a certain percentage.

As another poster mentioned, if she starts getting SS while she is working more than likely 85% of her SS income will be included as taxable income, possibly even putting her into a higher tax bracket.

Since she has earned income, the IRA (including Roth) rules apply. SS is not considered "earned income" as far as contributions to any retirement plan.

Again, have her call SS and set up an appointment with someone who can give her numbers based on her earnings history and current earnings.

 

[manning]

As another poster mentioned, if she starts getting SS while she is working more than likely 85% of her SS income will be included as taxable income, possibly even putting her into a higher tax bracket.

.

Working or not, up to 85% of SS payments can be taxed.

Here's more info

http://www.calcxml.com/do/inc08

 

[desertcruisers]

She will need to look at the tax for her situation. Depending on her income she may be taxed on 0, 50 or 85 percent. If she doesn't earn much she will pay no federal tax.

If she continues to work her payments will increase each year. Even if you are collecting SS, once a year they will calculate an increase in monthly payments based on the earned income from the previous year. The amount of increase however is very tiny each month.

 

[Maddle]

Another thing to consider - how much of a return can she get on the current SS payments if she invests them? She certainly would not want to risk that money, so that puts her into conservative low-risk [read small interest payments]investment vehicles. (less income tax on that money too!)

Compare that rate of return with the increased monthly payments if she starts collecting when she is older.

But wait - there's more!

Does she have an additional pension from her current employment? If it's a tidy sum she can count on, then it changes the picture for her again. (i.e. maybe taking the money now might give her a little "fun" money.)

Is she in good health? Will she live long enough to recoup the money she forgoes today if she waits for higher payments later?

Really, she could use a financial planner to help her consider ALL of the factors that PP have brought up.

Good luck.

Maddle

 

[Cindy B]

She needs to look at her work and tax situation. You do get a delayed retirement credit (DRC) for any work month between the full retirement age (FRA) and age 70. You can also receive an advanced retirement factor (ARF).

First check the FRA. The FRA ages have changed since the 80's... and it ranges from age 65 to 67. Look up the FRA chart on the Social Security website. I've had some clients very suprised to find out that the FRA for them is 65 +4 months or 66 instead of 65.

If you decide to still work and collect you will be "charged" if you make more money using the annual earnings test. Right now if you start collecting SS and you are still working there is an earnings limit before you will be overpaid and you will have to pay back the money to SS. Right now if you come on in 2010 before your FRA you can only make about 14, 160 (i have a chart at my desks--approximate figure) However there is a special "earnings" situation you can have for your first year on. -- this is called the LMETY year but she needs to stop working to use this situation.

She may also be placed in work suspense if she continues to work and collect and make over that limit. This means that she wont get paid but also wont have to pay anything back.

Make sure you/her decide on what months she will not be working if she stops working entirely.


Anyway... thats enough for now. Now on to 8.5 hours of SS!

 

[Cindy B]

OP I'm no expert but have some coworkers getting close to that magical age and looking into Social Security. One thing I've heard them mention is once you reach full retirement age you can collect SS and make as much as you want at your job. Before full retirement age if you draw, I believe, you can only make 13k in additional income w/out incurring any tax penalties. Something for your to check out as I said I'm along way off from there.

For 2010 it is 14, 160.