Legacy Asset Management
Principal & Director of Financial Planning
BS, Business Administration, University of Colorado at Boulder
Assets Under Management:
The answer to your first question is yes!
Visit https://www.ssa.gov/planners/retire/whileworking.html - "after you reach full retirement age, we will recalculate your benefit amount to give you credit for any months in which you did not receive a benefit because of your earnings. We will send you a letter telling you about any increase in your benefit amount."
So if you turn 62 this year and decide to draw benefits while working, the earnings threshold for 2018 is $17,040. If you make $24,000, they will reduce your benefits by $3480 a year, this is as you state a $1 reduction for every $2 earned above the threshold.
You will need to earn $41,040 to see a $1000 per month reduction.
When you turn full retirement age - your benefits will be recalculated based upon the earnings you continued to accrue (if they increase your lifetime earnings average) as well as give you credit for the reduction due to those earnings withheld. There is not a calculator to figure the specific number, but you can assume the full retirement age amount will be $2000 plus credit for the amount withheld due to earnings in previous years.
The administration penalizes you for earnings under full retirement age as they are trying to encourage people to take them only when you really need them. They also penalize you with the amount - i.e. starting benefits early results in a permanent reduction and in your case $700 a month. If you are continuing to work and dont necessarily need the income, consider delaying receipt of benefits. It will make a huge difference overtime.
No it should not since you will be using your FSA funds for different expenses. The government doesnt want taxpayers double dipping by using the FSA to pay for medical expenses and then using the same expenses as justification for a reimbursement from an HSA. Use your FSA for your healthcare expenses and your wife can use her HSA for her expenses.
An even better strategy would be to maximize contributions into the HSA and not use the funds for any healthcare expenses until retirement (so long as cash flow permits this savings expense). Let the funds accumulate and grow over time. Most HSAs have the option of investing a portion into a set of mutual funds or other diversified holdings. I recommend you dont invest it all, leave some in cash to the tune of a2 years or so of deducitibles in case you have a medical emergency. As this money grows overtime in the HSA - you will create a tax free (tax exempt growth as well) bucket to draw off of in retirement for health care related expenses. You will never have too much in an HSA with the projected cost of healtcare in retirement.
Your social security statement is showing you the benefits that you have already earned, so retiring at 59.5 will not change the amount.
The benefit you see on your statement is based upon the best 35 years of work. You can see the earnings they are using on the statement itself. The administration indexes your annual earnings over time to equal todays dollars. Then it averages the best 35 years and applies a formula to this average that results in what you can expect under the current law at your full retirement age of 67.
Since the administration averages the best earnings years, retiring early and potentially not including the best earnings years, means that you could have a larger benefit at age 67 since the average would be higher.
The only way your benefits would be reduced is if you decide to begin payments sooner than your age 67. You can start retirement benefits as early as age 62, and they will be reduced permanently due to the extra payments.
On the flip side, if you decide to delay benefits beyond age 67, i.e. up to age 70, then your amount will be permanently increased by 8% simple interest.
To answer your final question - SSA will not be recording any zeros on your record, what you see on your statement now is what you can expect at 67, unless the law changes.
This is a tricky question to answer - how is your $150,000 invested? If you have it in cash and want it to last for 15 years, the answer is simple- $833 per month. This is simply assuming very little interest on your 150,000 and divide it by the number of months you are solving for - which is 180.
If the money is invested conservatively, which is recommended if this is all you have, at say 4%, then the amount you can withdraw to last 15 years increases, but not by much. At a 4% average rate of return, the math works out to roughly $1100 a month over a 15 year period. This however does not address any variation or volatility in the investment mix. And also means there is zero in your account at month 181. If market suffers or you dont earn 4%, money could run out sooner.
A better way to analyze the definition of living comfortably is to determine how much per month you actually need to be "comfortable". This will then inform you as to how you should invest the $150,000, if at all, or if you should keep in cash.
You also need to evaluate what happens after 15 years, is there another pot of money to draw from? At 64, you are young in determining sustainable retirement income, albeit supplemental over parttime work, as at some point that parttime income will end. In 15 years, you will still actually be young - only 79 - and could easily live another 15 years. Evaluation of expenses, longevity & risk tolerance all need to be addressed before making a reasonable recommendation on how much you can take out per month to live comfortably.
If you need help with these recommendations, seek out a financial planner in your area to help you. Likely someone who does personal financial planning - not just investments - and can do it for you on an hourly or fee basis.
As you are aware - the social security adminstration reduces benefits if you are taking them under full retirement age in the following manner - $1 for every $2 earned above $17,040 for 2018. The amount in 2017 was $16,920. If you are $2000 over the limit in earned income from working - then your benefits will be reduced by $1000, spread out over 12 months. One note is that the IRS is talking about earnings from working - i.e. those subject to payroll taxes. Is the "profit sharing" check an amount from which income taxes & payroll taxes were withheld? Or is it a distribution from a profit sharing plan? If it was a distribution from a profit sharing plan, then this is not considered earnings from working, just a retirement plan distribution and as such, your benefits wont be reduced.
All that being said, if it is earnings from working, worst case is a $83 a month reduction in widows benefits.
ssa.gov has lots of good resources for you with more answers if they arise -
How work affects your benefits: https://www.ssa.gov/pubs/EN-05-10069.pdf
Details on Survivor benefits: https://www.ssa.gov/pubs/EN-05-10084.pdf