Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Social Security Earnings Test
Old 07-19-2008, 09:01 PM   #1
Thinks s/he gets paid by the post
 
Join Date: Oct 2006
Posts: 3,820
Social Security Earnings Test

I figured I understood this. If you start SS benefits before your Normal Retirement Age, and then work and earn "too much", your SS benefit will be reduced by $1 for each $2 of excess earnings.

Right?

I've hung around this forum long enough to know that if I'm considering working that much, I could look into reversing my SS application, repaying my benefits, and reapplying at NRA. I doubt that very many people would think of that.

But here's another angle. If I work and have my benefits reduced, the SS admin will recalculate my benefits at NRA, effectively refunding the entire amount that I lost.

I didn't know that. This guy, AEI - Short Publications - The Social Security Earnings Test says that most people don't know that, partially because the SS admin hasn't made an effort to tell them.

How about the people here. Is this old hat or news?
__________________

__________________
Independent is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-19-2008, 09:17 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,616
I'd never heard of that. Interesting. Giving you your full NRA check every month if you repay the benefits you took is one thing (and amazing enough in itself), but refunding taxes you've paid because you've changed your mind--that's a much bigger step.

I'd sure want to get it in writing from the SSA before I tried it. And I'd be conscious every day that they could change the policy--"Sorry, no refunds."
__________________

__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is online now   Reply With Quote
Old 07-20-2008, 05:49 AM   #3
Thinks s/he gets paid by the post
Tadpole's Avatar
 
Join Date: Jul 2004
Posts: 1,174
Quote:
Originally Posted by samclem View Post
I'd never heard of that. Interesting. Giving you your full NRA check every month if you repay the benefits you took is one thing (and amazing enough in itself), but refunding taxes you've paid because you've changed your mind--that's a much bigger step.

I'd sure want to get it in writing from the SSA before I tried it. And I'd be conscious every day that they could change the policy--"Sorry, no refunds."
I agree. This means that only people who can afford to take the risk should play the game.
__________________
Tadpole is offline   Reply With Quote
Old 07-20-2008, 10:04 AM   #4
Thinks s/he gets paid by the post
Bikerdude's Avatar
 
Join Date: Jul 2006
Posts: 1,901
Quote:
Originally Posted by Independent View Post

I didn't know that. This guy, AEI - Short Publications - The Social Security Earnings Test says that most people don't know that, partially because the SS admin hasn't made an effort to tell them.

How about the people here. Is this old hat or news?
A friend of mine went to his local SS office to apply. One of his questions was about the repayment of SS withheld due to work. The SS agent claimed there was no repayment that she was aware of. Looks like SS doesn’t even tell their own people.
__________________
“I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said” Alan Greenspan
Bikerdude is offline   Reply With Quote
Old 07-20-2008, 10:44 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,649
It sounds like Independent is talking about the normal SS reapplication process that Burns and others have written about. He would reapply, pay back exactly what SSA paid him and SSA would recalculate his benefits at the current age including adjustments for additional quarters worked. This would work fine if the reduction in benefits was made by SSA but would not effect any extra income taxes you paid during the intervening years.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 07-20-2008, 11:56 AM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,616
Quote:
Originally Posted by OAG View Post
Insofar as the taxes paid (if any), from the initial first application and withdrawal you have two options. One is a tax DEDUCTION (Schedule A) or a Tax CREDIT on line 70 or line 71 of IRS from 1040 - you should calculate which gives you the best refund.
OAG, how would that work? Say you paid $3000 each year for the last 3 years in these 1-for-2 SS "penalty taxes" because you worked while you were receiving benefits. So, you paid $9000 in extra taxes. Now, you've repaid SS all the money that you received over those years. Do you get a $9000 tax credit? For, do you look back over those years, determine al the income you were taxed on that wouldn't ave bee taxed had you not been receiving SS, and then list this as a deduction from your present income?

Or, maybe would you file amended returns for those 3 years? Ugh.

Sounds fairly complicated.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is online now   Reply With Quote
Old 07-20-2008, 11:57 AM   #7
Thinks s/he gets paid by the post
OAG's Avatar
 
Join Date: Jun 2006
Location: Central, Ohio, USA
Posts: 2,598
In any event it appears the SSA computers are programed to make the calculation at full retirement age and paying the higher benefit with no input from the recipient or human input on the part of SSA employees.
__________________
Vietnam Veteran, CW4 USA, Retired 1979
OAG is offline   Reply With Quote
Old 07-20-2008, 12:03 PM   #8
Thinks s/he gets paid by the post
OAG's Avatar
 
Join Date: Jun 2006
Location: Central, Ohio, USA
Posts: 2,598
Quote:
Originally Posted by samclem View Post
OAG, how would that work? Say you paid $3000 each year for the last 3 years in these 1-for-2 SS "penalty taxes" because you worked while you were receiving benefits. So, you paid $9000 in extra taxes. Now, you've repaid SS all the money that you received over those years. Do you get a $9000 tax credit? For, do you look back over those years, determine al the income you were taxed on that wouldn't ave bee taxed had you not been receiving SS, and then list this as a deduction from your present income?

Or, maybe would you file amended returns for those 3 years? Ugh.

Sounds fairly complicated.
I got so confused after writing that and then reading the OP's initial posting and the link I went back and just deleted my post. What I was talking about was application withdrawal (and repayment of all benefits received on the initial application) AFTER full retirement age and then reapplying for benefits again at a later age (i.e., at age 70). In the year you repay benefits the SSA sends you the routine 1099 they use to report benefits received (to you and the IRS) and since in the year of repayment you have a NEGATIVE number you can account for the repayment in one of the two ways I mentioned.
__________________
Vietnam Veteran, CW4 USA, Retired 1979
OAG is offline   Reply With Quote
Old 07-20-2008, 02:41 PM   #9
Thinks s/he gets paid by the post
 
Join Date: Oct 2006
Posts: 3,820
Quote:
Originally Posted by donheff View Post
It sounds like Independent is talking about the normal SS reapplication process that Burns and others have written about. He would reapply, pay back exactly what SSA paid him and SSA would recalculate his benefits at the current age including adjustments for additional quarters worked. This would work fine if the reduction in benefits was made by SSA but would not effect any extra income taxes you paid during the intervening years.
I think there are two different processes.

One process has you "re-applying" and writing a check to the government for the benefits you've already received.

The other seems to be automatic (or an easy application). They just increase your benefit at NRA to adjust for the reduction they already made. You keep the benefits you've already received.

Of course, the monthly benefit after NRA is bigger in the first than the second, but they are "actuarially equivalent".
__________________

__________________
Independent is offline   Reply With Quote
Reply

Tags
social security


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Social Security Earnings Penalty - Confused & Bewildered ocdude FIRE and Money 12 10-15-2009 11:44 PM
Social Security Engineer FIRECalc support 2 09-20-2007 04:00 PM
Social Security Again Again??? greg Other topics 60 11-13-2006 05:06 PM
any way to keep social security .............. zuki FIRE and Money 12 02-23-2005 05:23 PM
Social Security-Take It Now Or Later? haha Other topics 22 10-08-2004 04:36 PM

 

 
All times are GMT -6. The time now is 04:57 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.