SS earned income penalty question

[barryob]

New to this forum. Looks like it's full of people who could help. I receive my first SS check next month. Same month I turn 64. I know about the penalty for earning over $14 grand a year. I am self employed, and have no idea what my income will be year to year, month to month. My question is this: If If the SSA withholds some of my benefits due to my making more than the $14,000 threshold, how do they calculate my increased benefits after full retirement age to re-pay the benefits I did not receive? I even had a SSA phone agent tell me that I would not get any increase, but the website says otherwise. Any thoughts?

 

[REWahoo]

I believe the website to be accurate. You will get some slight increase in future benefits as a result of reduced benefits now.

 

[barryob]

I believe the website to be accurate. You will get some slight increase in future benefits as a result of reduced benefits now.

Thanks. I was looking for something a little more specific. Like....if they take $6,000 from you, they'll increase your benefit by $1 per month for the next 6,000 months. Just wondering what the payback time is. As someone who is self employed, I always feel optimistic about future earnings, but I really have no idea if I'm going to make a hundred grand in the next year, or next to nothing.

 

[REWahoo]

Someone more knowledgeable than I may come along with a definitive answer, but I suspect the amount of added benefit varies depending on a number of factors. All I could find was this example from SSA Publication No. 05-10069 which you've probably already seen:

Will you receive higher monthly benefits later if benefits are withheld because of work?

Yes. If some of your retirement benefits are withheld because of your earnings, your benefits will be increased starting at your full retirement age to take into account those months in which benefits were withheld.

As an example, let us say you claim retirement benefits upon turning 62 in 2011 and your payment is $750 per month. Then, you return to work and have 12 months of benefits withheld. We would recalculate your benefit at your full retirement age of 66 and pay you $800 a month (in today’s dollars). Or, maybe you earn so much between the ages of 62 and 66 that all benefits in those years are withheld. In that case, we would pay you $1,000 a month starting at age 66.

 

[barryob]

I did see that. But it really doesn't say how they came up with the figure. It sure looks like it'll take a long time to get that money back, though! If they withhold $9 grand in the scenario they use, and raise your monthly payment from $850 to $900, at $50 a month, it'll take 15 years to get the money back!

 

[73ss454]

I did see that. But it really doesn't say how they came up with the figure. It sure looks like it'll take a long time to get that money back, though! If they withhold $9 grand in the scenario they use, and raise your monthly payment from $850 to $900, at $50 a month, it'll take 15 years to get the money back!

You'll just have to keep breathing.

 

[rescueme]

You'll just have to keep breathing.

Or it goes to his DW, assuming he's married and DW get's less SS.

Something to die for ...

 

[clifp]

I did see that. But it really doesn't say how they came up with the figure. It sure looks like it'll take a long time to get that money back, though! If they withhold $9 grand in the scenario they use, and raise your monthly payment from $850 to $900, at $50 a month, it'll take 15 years to get the money back!

The life expectancy for a 63 year old male is 18 year so when you include the time value of money a 15 year payback period seems about right.

By and large SS tries hard to make sure that actuarialy you get the same benefits no matter when you choose to take them.

One advantage to postponing most SS benefits is they are better indexed to inflation than almost all alternatives.

 

[Dreamer]

If you google POMS for Social Security and then go to RS00615.101, it explains the Retirement Benefit Reduction factors, which are the number of months that you take SS retirement before your Full Retirement Age (FRA). If a person took retirement 30 months before FRA and later had 6 social security checks withheld due to earnings, his benefit would be recalculated at a later time to be reduced only for 24 months. It is pretty cut and dried for an employee. It is not so cut and dried in certain cases for a self-employed person. RS02505.065 goes into the Meaning of Substantial Services in Self-Employment.

I retired over 5 years ago and I am sure that there have been many changes in Social Security regulations, that I have not kept up on. If you want to know anything about social security, go to the source, Social Security. If they give you an answer that does not explain to your satisfaction, keep questioning them. Ask to see something in writing. Hope this helps.