Early social security--the first year

[eriter]

I'm trying to understand the SSA information concerning taking social security when I turn 62.  Apparently, for the first 12 months, if I make over $1000 in any month, I will not receive any social security for that month.  Is that correct? (I know there is a cap of approximately $12,000 for the second and third years before they take one dollar for every two I make above $12K, but it looks like the first 12 months don't fall under that exact rule).

Also, for self-employed, there is apparently an additional test to see if I get social security for the first 12 months.  It appears that if I work more than 45 hours a month being self-employed I will also be disallowed a payment for that month.  Does anyone know for sure how that works? Is there any way for them to see how many hours a months someone works for himself?

It all seems a bit convoluted to me, but I guess that should not be unexpected.

 

[Gail]

My husband is self employed and began drawing benefits in 2005, so I can tell you what our experience was.

As to the $1000 per month, there is a special rule for your first year if you are not full retirement age, and you begin drawing benefits in any month other than January. You can earn as much as you like up until the month that you want to start drawing your benefits. (When you file, they will ask you how much that amount is/will be.) Then, for the remaining months of that year, you can earn $1000 each month. When you begin your first full year of benefits, the yearly limit kicks in.

As to the hours, the lady who signed him up told him about the hours restriction and was reassured by him that he would not be working more than that. I believe they are more concerned about professionals like attorneys and doctors than anyone else.

 

[Martha]

For the first year: http://tinyurl.com/ct22u
When entitlement to benefits begins or ends during the year, many people work in months before or after entitlement. We use a monthly test to consider these earnings. The monthly earnings test provides that a person can receive full benefits for any month in which he or she does not earn wages over one-twelfth of the annual exempt amount and does not perform substantial services in self-employment.

The monthly amount for 2006 is $1,040. We pay benefits in these months regardless of the amount by which the person's earnings exceed the annual exempt amount. We use the monthly earnings test in the first year that a person does not work over the monthly limit in at least 1 month. We also use the monthly test for the year benefits end for children (including students) or parents who get benefits because they are caring for a young or disabled child.

After the first year:
http://tinyurl.com/dgmss

1. If you are under 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.

2. 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

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


When figuring out how much is deducted from your benefits, only the wages you make from a job, or your net profit if you’re self-employed is counted. This includes bonuses, commissions and vacation pay, but not pensions, annuities, investment income, interest, veterans or other government or military retirement benefits. It is important to remember that when you continue to work while you get benefits, Social Security will check your record every year to see if those additional earnings will increase your monthly payment. If there is an increase, they will send you a notice of your new benefit amount.

 

[eriter]

Thanks for the replies.  I decided to go ahead and apply for early SS since it doesn't make much sense to wait in my case.  The fact that you are allowed to earn up to $1000 a month in the first year, without the $12,000 annual cap, actually helps me out since I can schedule my work to take place in a particular month. 

I sent in the application online last night so I will wait to see what happens.