One of our clients had a situation that was worthy of discussion. As you may or may not know, your Social Security benefit is your story….yours alone; it is based on your top 35 years of earnings. You may be entitled to improve your benefit based on certain filing strategies, but that is a long list and you need to know how to combine the strategies with your spouse’s benefit if married……individually vs. collectively, delaying your benefit, etc.
This client makes a very good salary for herself. She works hard, long hours; her husband died at an early age, while on disability, leaving her with children in the mix; not an easy set of circumstances for anyone.
Her goal is to retire early and enjoy her first grandchild, which is easy to understand. She is entitled to survivor benefits starting at age 60 (although they will be reduced by 28.5% if taken when eligible and subject to earnings limitations) and then switch to her own Social Security benefit which would be higher. So what is the problem?
She earns too much money…..works too hard and her benefits, if she takes them early are going to take a beating as a result. Fair? We don’t make the rules; just try to navigate through them to help people get the most benefit they deserve.
It is true that you can work and draw Social Security at the same time. But, the earning limits for 2015 is $15,720. For every two dollars you earn over this amount, one dollar of your benefit would be withheld. If you are 64 and receiving $1500 per month from SS, you would have to earn $51,720 to stop all 12 of your SS payments. If any of your SS payments is stopped due to work, you get credit back for every missing month, and a raise in future benefits. It is called the Adjustment to the Reduction Factor and it happens automatically when you reach Full Retirement Age (not before). This is a very complicated formula, so don’t try to do this without advice!!
So, what is the problem…..she should just take her survivor benefit, keep working, and switch to her benefit after 66. EXCEPTION to the RULES – the Adjustment to the Reduction Factor does not apply to SPOUSAL benefits or SURVIVOR benefits.
As we tell our readers, there are many exceptions to the rules that you need to be aware of before you make this basically permanent decision. We cannot possibly discuss all of them through our news articles…..professional advice is necessary.
If our client decides to take the benefits she is entitled to, at the time she is entitled to take them, her income would have to be reduced by almost 2/3. At 66, if she quits working she can take her benefit which is higher, or draw her survivor benefit and have to continue working part-time to make up the difference. But guess what…..from a financial standpoint, she will probably never see the survivor benefit her husband worked hard to provide. Fair? You decide.
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