61-1/2 and thinking about it

[gray_jay]

Hello, I found this forum with lot's of good information. I hope it can help me decide what to do in 6 months when I'm 62. First, my reasons may or may not be practical. Up till 6 yrs ago, my income was pretty high, approaching 6 figures but the last 6 could be called "survival"

Even with many years of good pay, I still have a good sized mortgage payment and my 401Ks aren't at the level I'd like. Hell, they aren't even at the level they were 6 yrs ago thanks to 2001 and 2002, which were terrible for my portfolis.

Although things were starting to look up and move from survival to promising, things have recently began to slide. My present job is in sales and the immediate outlook aren't bright. My small employer is undercapitalized and I'm not sure he can make it another year without failing to meet payroll, etc. Even if he does make it, the problems of undercapitalization are severely hampering my ability to sell and make commisions. There is no way I can survive on the base pay.

So here I am looking at the prospect of "free" money from SS but I have some questions that I didn't see answered on this site. Here's my situation:

Let's say I begin collecting at 62. The benefit listed on my most recent SS report isn't enough to get me by with current level of obligations. If I also begin collecting a pension at 62, that will help but I was thinking of something part time and less stressfull to add to it.

I understand I can make up to $12,000 or so per year. My question is does my pension amount count towards this $12,000?

My wife doesn't turn 62 until later in the year. She never worked until the last few years and her income has been pretty low so 1/2 of my SS money would be far more that she would get on her own.

So, let's say I do it. Somebody wiser han me tell me if my expectoins are correct.

I start collecting the amount estimated on my SS report at 62. I also start collecting my pension at 62. My wife continues to work until later in the year then starts collecting 50% of my monthly SS benifit when she turns 62.

I work somewhere and make less than the $12,000 max. and live somewhat happiliy until i reach full retirement age.

Am I correct up to here?

If yes, what happens when I reach 66? Do I become elligible for a larger benefit because of 4 years working and adding to my total? Or, because I am already using my highest paid 35 yrs to calculate my benefit, are additional monies paid to SS wasted? (not that I'd have a choice though)

There you have my intro and I'd appreciate anyone's input.

[REWahoo]

Hello Jay, welcome to the forum.

I'm no SS expert but I've found lots of answers to questions at the SS website www.ss.gov. Check the frequently asked questions area.

Originally Posted by gray_jay

Let's say I begin collecting at 62. The benefit listed on my most recent SS report isn't enough to get me by with current level of obligations. If I also begin collecting a pension at 62, that will help but I was thinking of something part time and less stressfull to add to it.

I understand I can make up to $12,000 or so per year. My question is does my pension amount count towards this $12,000?

From the SS website:

Q. Will my retirement pension from my job reduce the amount of my Social Security benefit?
A. If your pension is from work where you also paid Social Security taxes, it will not affect your Social Security benefit. However, pensions based on work that is not covered by Social Security (for example, the federal civil service and some state, local, or foreign government systems) probably will reduce the amount of your Social Security benefit.

Originally Posted by gray_jay

My wife doesn't turn 62 until later in the year. She never worked until the last few years and her income has been pretty low so 1/2 of my SS money would be far more that she would get on her own.

So, let's say I do it. Somebody wiser han me tell me if my expectoins are correct.

I start collecting the amount estimated on my SS report at 62. I also start collecting my pension at 62. My wife continues to work until later in the year then starts collecting 50% of my monthly SS benifit when she turns 62.

I work somewhere and make less than the $12,000 max. and live somewhat happiliy until i reach full retirement age.

Am I correct up to here?

I belive the maximum earnings amount increases each year and went from $12,000 in 2005 to $12,480 in 2006. To answer your question, I believe you are basically correct, but I'm not sure your "live somewhat happily" requirement is something I can express an opinion on at this point.

Originally Posted by gray_jay

If yes, what happens when I reach 66? Do I become elligible for a larger benefit because of 4 years working and adding to my total? Or, because I am already using my highest paid 35 yrs to calculate my benefit, are additional monies paid to SS wasted? (not that I'd have a choice though)

Since your 35 highest years of earnings are used to calculate your benefit, it doesn't appear that your added work will have any real impact on your SS payout. But if it's any consolation, the rest of us collecting SS will be very appreciative of your continued contribution.

[jdw_fire]

Originally Posted by gray_jay

I understand I can make up to $12,000 or so per year.* My question is does my pension amount count towards this $12,000?* *

Here is a quote from the SSA website, note what I bolded at the bottom.

How much can I earn and still receive Social Security benefits?

* Answer
* SSA uses the formulas below, depending on your age, to determine how much your benefit must be reduced:


Note: There are different rules for people receiving Social Security Disability.

If you are under normal (or full) retirement age (FRA): when you start getting your Social Security payments, $1 in benefits will be deducted for each $2 you earn above the annual limit. For 2006 that limit is $12,480 and for 2005, that limit is $12,000. Remember, the earliest age that you can receive Social Security retirement benefits remains 62 even though the FRA is rising.

In the year you reach your FRA: $1 in benefits will be deducted for each $3 you earn above a different limit, but only counting earnings before the month you reach FRA. For 2006, this limit is $33,240; for 2005, this limit is $31,800

Starting with the month you reach FRA:, you will get your benefits with NO limit on your earnings.

For information on the earnings limits for prior years, see Exempt Amounts Under the Earnings Test.

Please Note: Earned income is defined as income from wages or net earnings from self-employment. Pensions, 401K distributions, dividends, interest, and IRA distributions are NOT earned income.

Remember that how much of it is taxed is based on your income not your earned income.

[brewer12345]

When you turn 66, nothig happens (as far as SS is concerned, anyway). If you take early SS at 62 your payouts stay reduced for the rest of your life.

Jay, have you considered downsizing your home or relocating to a lower cost area/lifestyle to make retirement more feasible?

[REWahoo]

Originally Posted by brewer12345

If you take early SS at 62 your payouts stay reduced for the rest of your life.

Reduced yes, but they may increase due to additional work although the amount of increase will probably be small. From SS.gov:

Q. My neighbor, who is retired, told me that the income he receives from his part-time job at the local nursery gives him an increase in his Social Security benefits. Is that right?

A. People who return to work after they start receiving benefits may be able to receive a higher benefit based on those earnings. This is because Social Security automatically recomputes the benefit amount after the additional earnings are credited to the individual's earnings record.

[brewer12345]

Agreed, REW. I was under the impression that OP thought that his SS payments would go up to the full amount at 66 after he started drawing reduced payments at 62. What I describe won't happen.

[REWahoo]

brewer, I absolutely love the fact that someone comes on here and posts a question asking "What time is it?" and we respond by telling him not only what time it is, but how time varies by zone and government regulation. Then we tell him how to build a clock, discuss the history of clockbuilding, the temperature in major areas of Europe and Asia, plus the sexual history of various unrelated species.

Are we good, or what?

[brewer12345]

Actually, i was thinking that it is amazing how widely a single statement can be interpreted .

[REWahoo]

Good point. I'll add that to the list of 'forum attributes and characteristics'.

[Rich_in_Tampa]

Originally Posted by REWahoo!

brewer, I absolutely love the fact that someone comes on here and posts a question asking "What time is it?" and we respond by telling him not only what time it is, but how time varies by zone and government regulation. Then we tell him how to build a clock, discuss the history of clockbuilding, the temperature in major areas of Europe and Asia, plus the sexual history of various unrelated species.

Are we good, or what?

And don't forget: each of our very strong opinions on the current time, why Rolexes piss us off, and how the da** liberals/conservatives/whatevers always blame x on y, etc.

[spideyrdpd]

Maybe there is a tool that could be built to tell the time
quatify when to take your ss and factor in various work scenarios