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Does anything "magic" happen at FRA for Social Security?
Old 05-23-2016, 10:31 AM   #1
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Does anything "magic" happen at FRA for Social Security?

My sis is 60 and would like to retire at 63 or 64; however, she just had a meeting with an advisor who pressured her to wait until full retirement age. She now has it in her head that something magic happens at FRA and she is now convinced she must wait until exactly age 66 and 4 months to claim Social Security.

She understands the decrease for claiming "early" so, putting that aside - are there any other advantages/disadvantages for her to wait until FRA?

She is unmarried.
She does not plan to make more than about $5,000/year in retirement.

I'm not asking the "when should I claim SS?" question - plenty of threads on that - I'm asking for a list of all the advantages of waiting until FRA to claim, if any, for an unmarried person who doesn't plan to work in retirement.
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Old 05-23-2016, 10:46 AM   #2
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Nothing magic except you get more money. But it's best to start getting SS around January to maximize the income for the tax year rather than get it in June or Sep.
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Old 05-23-2016, 11:19 AM   #3
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At FRA you can work all you want. Those earnings will then not be subject to a SS penalty. Before FRA you pay a steep penalty to work.

Now, isn't that magic !
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Old 05-23-2016, 11:32 AM   #4
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But it's best to start getting SS around January to maximize the income for the tax year rather than get it in June or Sep.
Not sure I understand why you would necessarily want to "maximize the income for the tax year."
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Old 05-23-2016, 11:53 AM   #5
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Does she realize that if she keeps working and adding money to her retirement account, this "advisor" will make more money off her for a longer period of time just sayin. My SIL had the opposite advice from her money man..take SS the first month you can and just let your investments keep growing and growing..OOPS,, that leads to more money for the "advisor" too. Do you see a pattern here?
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Old 05-23-2016, 12:04 PM   #6
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Not sure I understand why you would necessarily want to "maximize the income for the tax year."
Because you pay tax per year. For example, if you take it in June for $2000 a month, that works out to be $12,000 per year. If you take it in Jan but with lower amount like $1800 per month, even though it's less $2000 per month, it works out to be more for the tax year. $1800x12 vs $2000x6.
This is confirmed on another forum by a person who used to work for Social Security.
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Old 05-23-2016, 12:23 PM   #7
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At FRA you can work all you want. Those earnings will then not be subject to a SS penalty. Before FRA you pay a steep penalty to work.

Now, isn't that magic !
She would only be making maybe $5,000 a year - well under the penalty number unless I'm missing something
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Old 05-23-2016, 12:28 PM   #8
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Even if she doesn't plan to work after retirement now, if her plans did change, waiting to FRA gives you a few more income options without bumping into the earning ceiling.

We have some people here who found some work they enjoyed doing in their early to mid 60's and kept on working.
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Old 05-23-2016, 12:35 PM   #9
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She would only be making maybe $5,000 a year - well under the penalty number unless I'm missing something
You can earn up to $15k+ in 2015 before it affects your SS.
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Old 05-24-2016, 08:31 AM   #10
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So, I think a fair summary is there is nothing magic about claiming at 66 and 4 months if one doesn't plan to earn over $15,000/year.

I think the SSA website and popular lingo is very caught up that anything before then is "early" - and there's also a lot of folks who think that the SS calculations have only 3 data points: 62 ("early"), 67 ("FRA") and 70 ("late") when in fact SSA does calculations by the month; so one gets more in the check for leaving at 64 and 11 months than at 64 and 10 months, but less than at 65 and 2 months, etc.

Thanks everyone - I'm glad we're not missing any info on this.
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Old 05-24-2016, 08:39 AM   #11
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Quote:
Quote:
Originally Posted by Ian S
Not sure I understand why you would necessarily want to "maximize the income for the tax year."

Because you pay tax per year. For example, if you take it in June for $2000 a month, that works out to be $12,000 per year. If you take it in Jan but with lower amount like $1800 per month, even though it's less $2000 per month, it works out to be more for the tax year. $1800x12 vs $2000x6.
This is confirmed on another forum by a person who used to work for Social Security.
But the questions is WHY?

Work your calculation for the second (and all subsequent) years and you get a different answer. This sounds like a confused adviser.
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Old 05-24-2016, 08:56 AM   #12
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There may be something that happens with Spousal Benefits, and things like "File and Suspend". But that is going away. Otherwise, each month makes a difference, either way.

I think you still get the full CPI increase, if any, no matter when you file. No matter if you start at the lower or higher base.
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Old 05-24-2016, 09:14 AM   #13
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I think you can still get a retroactive 6 months' lump sum if you wait til FRA plus at least six months to file for it--not sure if file and suspend is involved in this? Most of the maximization strategies seem to have been available only to married couples. They seem to have required FRA.

OP's unmarried sister probably isn't affected much by waiting until FRA or by filing early. She should ask to FA to explain in detail why it would benefit her to wait. It seems the FA would be better off if she filed early and preserved more of her nest egg for the FA to manage, right? So there must be some reason for recommending she wait until FRA.
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Old 05-24-2016, 09:41 AM   #14
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But the questions is WHY?

Work your calculation for the second (and all subsequent) years and you get a different answer. This sounds like a confused adviser.
That was my thinking. What you get out of SS is actuarially determined and is not a function of tax year. An individual may or may not wish to have more SS income in the tax year when they first start to draw but it depends on their individual circumstances.
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Old 05-24-2016, 10:41 AM   #15
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A little confused about the FA's position is her telling her to keep working until FRA or just to go head and retire and not claim SS until FRA?
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Old 05-24-2016, 10:50 AM   #16
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At FRA you can work all you want. Those earnings will then not be subject to a SS penalty. Before FRA you pay a steep penalty to work.

Now, isn't that magic !
I don't think its a penalty. You actually get it back as an addition on your work time when you hit FRA.
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Old 05-24-2016, 01:09 PM   #17
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A little confused about the FA's position is her telling her to keep working until FRA or just to go head and retire and not claim SS until FRA?
He's telling her to keep working until FRA and not retire "early" - he is adopting the SSA's use of "early" to mean "earlier than 66 and 4 months"

I wonder if most on this board would consider 65 to be "early" retirement
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Old 05-24-2016, 01:40 PM   #18
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That how I read your first post and he will definitely collect more commission money if she works full time. Without knowing any details it's hard to tell how much of a cushion she would have at 66 compared to an earlier age.
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