Earnings Test for Dual Income Families

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Working later in life, has almost become the norm. People love their jobs, have good health, look forward to additional income and savings, and sometimes just need to stay busy. With that said, whatever your situation might be, taking the Social Security benefit while still working can create quite a challenge.

The Earnings Test is quite complicated if there is not a thorough understanding of the rules and regulations. Prior to your Full Retirement Age, if you draw your Social Security benefit and continue working, you will be limited to $16,920 (2017 limit) earnings before penalties will be applied against your benefit amount. For every $2 you earn over the $16,920 limit, $1 of benefits will be withheld. In the year, you reach full retirement age, a more generous earnings test applies. In this scenario, you will lose $1 in benefits for every $3 earned over the $44,880 earnings limitations cap (2017). After full retirement age, the earnings test disappears.

If married, this poses many questions and requires a review of your situation. What are your age differences? Who is going to file and who is going to continue working? Are you both going to file and both continue working? Who has the excess earnings and whose benefit are the Social Security benefits calculated on if using a spousal benefit? Will this additional income put you in another tax bracket?

Another caveat to this rule, is if a couple decides to draw their benefits early, and one of the couple is drawing a spousal benefit, if the remaining person is still working and earning over the Earnings Limitation therefore reducing their benefit, the other parties benefit will be reduced in unison. Is this a mouthful – you bet!! The earnings test clock restarts each year that the person continues to work while under full retirement age and collecting benefits.

As we have stated over and over, there are 2,728 rules and regulations. And your decision to file is basically a permanent decision. Get it right the first time!! We have had many clients that have filed early, continued working, did not know how to structure what they were filing for, and ended up receiving NO Social Security income because of their earnings, locked in their benefit amount and reduced their Survivor Benefit all in one fell swoop.

Call Pillars LLC at 601-954-0699 (DIAL before you FILE) and Roy and Diane will help you with these decisions and show you how to maximize your benefit and accomplish your personal goals. They are both National Social Security Advisors and Roy is a former CPA of 40+ years. We are in Corinth but service clients in all 50 states.

What Do You Really Know About Social Security Laws?

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Roy and I have found with talking to people each day, even the most basic knowledge about Social Security is not understood. With all the articles on the internet, some good and some bad, people are just confused and basically give up educating themselves. They drive to the Social Security office and just take what they are given. This does not have to be the case. Remember, the Social Security office will give you information on your benefit only…..not advice on how to file collectively and improve your income position.

In this article, we are going to define some of the more elementary terms related to Social Security:

  1. Cumulative Benefits – lifetime payout of Social Security benefits.
  2. Delayed Retirement Credits – 8% increase in your benefit amount per year, for every year you wait to file after your Full Retirement Age. This is actually calculated monthly, so you do not have to wait an entire year.
  3. Delayed Strategy – claiming benefits after Full Retirement Age (FRA) in order to receive increased benefits.
  4. Divorced Benefits – benefits paid to the divorced spouse of an eligible worker to whom you were married at least 10 years – must comply with the new law changes effective November 2, 2015.
  5. Earnings Record – the history of your earnings for the years you have worked during your lifetime.
  6. Earnings Test – the reduction in benefit taken if you continue to work while receiving benefits before you reach Full Retirement Age (FRA). Once you reach FRA, the earnings test no longer applies, and there is no limit on your income. The year your turn FRA, the Earnings Limitations amount is substantially higher.
  7. Primary Insurance Amount – (PIA) is the benefit you will receive at your FRA.
  8. Windfall Elimination Provision (WEP) – a provision that may reduce Social Security benefits based on your earnings history if you are eligible to receive a pension from work not covered by Social Security taxes.
  9. Survivor Benefits – benefits paid to the surviving spouse of a deceased eligible worker.
  10. File and Suspend – a Social Security policy allowing a worker to file an application for retirement benefits but immediately suspend payments. This makes the worker’s spouse eligible to file for and receive spousal benefits. This also allows the worker’s benefit to accrue delayed retirement credits. However, the Bi-Partisan Budget Act of 2015 has altered this policy. Effective April 30, 2016, File and Suspend will no longer exist.

This is truly only a fraction of the many rules and regulations (2,827) that encompass the Social Security law. And, all of these laws carry exceptions to the rules. Most people that take their taxes to be done by an accountant or CPA have a better end result…..because these professionals are versed in the law and know the exceptions to the rules. This is also true of your Social Security Benefit. This is a benefit that will be with you the rest of your life, so have it professionally reviewed for the best end result.

Please visit our website at www.pillarsllc.com or email us with any questions at dthompson@pillarsllc.com. You may also call Pillars (Roy and Diane Thompson) at 601-954-0699 with any questions you may have. We enjoy what we do and love to help people better their Social Security benefit.