Useful Links

Audie Murphy · 06-10-2019, 12:15 PM

Hi everyone. My name is Jon. Audie is my Blue Heeler and thought it would make a good forum handle. I am 52 and in sales. DW is 48 and is real estate appraiser. We have about 640K in retirement thus far. We have a little over 100k remaining on our 350K home and are closing in fast on the 1M NW. We are frugal and save a lot. I have a question regarding maximum income when taking Social Security at 62. Should I ask it here or start another thread in a more appropriate sub forum? I have lurked here for probably a close to a year so I have done quite a bit of reading. I like the idea of learning how others are doing retirement and hope to try to stay up to speed for when my time comes. Cheers to everyone living their dreams.

Jon

travelbug_ali · 06-10-2019, 01:00 PM

I can't answer your questions but I just wanted to say hey to a fellow newbie! so...hey!

and wow, $640k in retirement?

6miths · 06-10-2019, 01:06 PM

Welcome, an auspicious name for a great dog I am sure. We are on our second blue heeler. Wonderful dogs.

Mdlerth · 06-10-2019, 01:50 PM

Quote:

Originally Posted by Audie Murphy

Hi everyone. My name is Jon.

Welcome, Jon. Delighted to meet you.

Quote:

We have a little over 100k remaining on our 350K home and are closing in fast on the 1M NW.

Once you hit it, you'll close in on the second M much, much faster!

Quote:

I have a question regarding maximum income when taking Social Security at 62. Should I ask it here or start another thread in a more appropriate sub forum?

You should ask your question. If it fits better somewhere else, the moderators will know where it goes and they'll take care of you.

Audie Murphy · 06-10-2019, 01:53 PM

Quote:

Originally Posted by 6miths

Welcome, an auspicious name for a great dog I am sure. We are on our second blue heeler. Wonderful dogs.

I couldn’t agree more. He is obsessive over certain things (toys, play and anything that moves in his yard) but really an amazing dog. He is our first ACD. We had two great dogs before him that required a lot of daily medical care to keep them going. I vowed that he would receive the same time commitment I gave to their care but attention would be towards his development and growth. Audie constantly gets compliments on his calm behavior. He is also protective, loving and loyal. We actually plan vacations and travel with him. Off Leash K9 training has also given him great freedom.

Thanks for the kind welcome.

Audie Murphy · 06-10-2019, 02:02 PM

Here is my question.

When turning 62 and claiming the Social Security benefit. The annual income without being penalized is $17,640.

Let's say you were to earn 42k in salary. Let's also say that you continued to contribute to your 401k to the maximum annual amount of $24,500. Would you face penalties or would you be considered as having qualified as not exceeding the 17,640 amount (actual earnings would be 17,500)?

Mdlerth · 06-10-2019, 02:19 PM

From the Social Security Administration page "How Work Affects Your Benefits":

Quote:

What income counts…and when
do we count it?
If you work for someone else, only your
wages count toward Social Security’s
earnings limits. If you’re self-employed,
we count only your net earnings from
self-employment. For the earnings
limits, we don’t count income such as
other government benefits, investment
earnings, interest, pensions, annuities,
and capital gains. We do count an
employee’s contribution to a pension
or retirement plan, however, if the
contribution amount is included in the
employee’s gross wages.

https://www.ssa.gov/pubs/EN-05-10069.pdf

6miths · 06-10-2019, 02:25 PM

Quote:

Originally Posted by Audie Murphy

I couldn’t agree more. He is obsessive over certain things (toys, play and anything that moves in his yard) but really an amazing dog. He is our first ACD. We had two great dogs before him that required a lot of daily medical care to keep them going. I vowed that he would receive the same time commitment I gave to their care but attention would be towards his development and growth. Audie constantly gets compliments on his calm behavior. He is also protective, loving and loyal. We actually plan vacations and travel with him. Off Leash K9 training has also given him great freedom.

Thanks for the kind welcome.

Over the years we have had countless parents with young children ask us what kind of dog ours were and many questions. Both have been amazing with people of all kinds but especially young children - engaging them and getting them to play - throw sticks and balls. Our first had a bit of a tendency to herd little ones but our current one much less so for children but still with animals - in her case deer. Big bark when someone is at the door but no bite. Wonderful companions.

Audie Murphy · 06-10-2019, 02:36 PM

Quote:

Originally Posted by Mdlerth

From the Social Security Administration page "How Work Affects Your Benefits":

https://www.ssa.gov/pubs/EN-05-10069.pdf

I am still not completely understanding the answer to my question. For instance if I use Roth 401k then they would see my entire income and I would be penalized. If I contributed to a pre-tax traditional 401k then my income would be below the threshold and I could evade the penalty. That is my understanding as I read it. Has someone done this that can confirm or deny?

Thank you.

HI Bill · 06-10-2019, 04:16 PM

Quote:

Originally Posted by Audie Murphy

I am still not completely understanding the answer to my question. For instance if I use Roth 401k then they would see my entire income and I would be penalized. If I contributed to a pre-tax traditional 401k then my income would be below the threshold and I could evade the penalty. That is my understanding as I read it. Has someone done this that can confirm or deny?

Thank you.

"Gross wages are the total amount an employee is paid before they withhold taxes and other deductions." Since your contributions to an IRA come from your gross wages, I believe they are counted. I've never encountered this, so if I'm wrong, please chime in.

Mdlerth · 06-10-2019, 04:45 PM

Quote:

Originally Posted by Audie Murphy

I am still not completely understanding the answer to my question. For instance if I use Roth 401k then they would see my entire income and I would be penalized. If I contributed to a pre-tax traditional 401k then my income would be below the threshold and I could evade the penalty. That is my understanding as I read it. Has someone done this that can confirm or deny?

Thank you.

Read the excerpt again. "What income counts. For the earnings limits... we do count an employee's contribution to a pension or retirement plan... if the contribution amount is included in an employee's gross wages."

Your gross wages means "all the money your employer paid you". Whether you directed some of it into a 401k doesn't matter to the Social Security Administration. They will look at that number and if it's more than $17,640 then they will begin to apply reductions to your benefit. If you earn $42,000 then they will reduce your benefit by $1 for every $2 above $17,640, i.e.,

42000 - 17640 = 24360 excess earnings
24360 / 2 = 12180 reduction in SS benefit

All your 401k deductions will do is reduce your tax liability to the IRS. They will NOT affect whether SSA adjusts your SS benefit.

I sense this is not what you wanted to hear. Sorry, but the language on the SS website is clear.

But from your OP, you should be in excellent shape at 62. That's ten years away. I'd expect you'll have NW in the region of $2M or more by then. Why would you be worried about the earnings limit then? If you're still working, you wouldn't need to draw the benefit anyway, and if you're retired the penalty won't apply. Maybe I'm the one who's not understanding the issue.

**Gumby** · 06-10-2019, 04:57 PM

You can verify this by looking at your last W-2 form. Your social security wages (Box 3) is greater than your federal taxable wages, tips and other compensation (Box 1) by at least the amount of your 401k contributions. So you don't pay federal income tax on your 401k contributions, but those dollars still count as social security income.

Audie Murphy · 06-10-2019, 05:06 PM

Thanks to everyone for the information and replys. I thought I discovered a way to maximize earnings while still on employer covered health care and start my SS benefit asap and still fully contribute to 401k. I guess I will delay the SS and continue working until 65 most likely. At 65 Medicare will be an option and I can change to part time or stop working all together.

Audie Murphy · 06-10-2019, 05:08 PM

Quote:

Originally Posted by Gumby

You can verify this by looking at your last W-2 form. Your social security wages (Box 3) is greater than your federal taxable wages, tips and other compensation (Box 1) by at least the amount of your 401k contributions. So you don't pay federal income tax on your 401k contributions, but those dollars still count as social security income.

That wouldn't really be accurate since my contributions are to Roth 401k and are post tax and will show. I guess the only dollars that are pre tax are the employer matching dollars.

Mr._Graybeard · 06-11-2019, 06:56 AM

Quote:

Originally Posted by Audie Murphy

I couldn’t agree more. He is obsessive over certain things (toys, play and anything that moves in his yard) but really an amazing dog. He is our first ACD. We had two great dogs before him that required a lot of daily medical care to keep them going. I vowed that he would receive the same time commitment I gave to their care but attention would be towards his development and growth. Audie constantly gets compliments on his calm behavior. He is also protective, loving and loyal. We actually plan vacations and travel with him. Off Leash K9 training has also given him great freedom.

Thanks for the kind welcome.

Congrats on your training success with Audie. Heelers are great dogs.

Audie Murphy · 06-11-2019, 07:06 AM

Quote:

Originally Posted by Mdlerth

Maybe I'm the one who's not understanding the issue.

Thank you for the break down. I better understand now. I was hoping my idea was correct and I could maintain employer health insurance while maximizing both SS and my income and continue adding to retirement nest egg.

I did the math on SS and I see no upside to waiting to start getting my money back. The down side is the income limitation. I am sure that SS income plus a part time job will be plenty of income but there is the out of pocket cost of health insurance issue. Maybe something will change in the next ten years. Now we are talking about only 3 years of out of pocket until Medicare so depending on what seems right at the time we may just make the jump.

Thanks so much for the info.

Jon