Are Social Security benefits withheld because of excess earnings returned to you in monthly installments when you reach full retirement age?
I am 61 years old. If I begin taking my Social Security benefits at age 66, I will receive around $2,700. If I begin taking benefits at age 62, I will receive around $2,000. If my earning are in excess by $24,000, I will have $1,000 dollars a month withheld (assuming the equation is $1.00 for every $2.00 over the maximum earnings amount. When I am 66.5, I will not longer be subject to the earnings test. What would my monthly benefits be at this point? Would it be the $2,000 benefit amount, or $2,000 amount plus some portion of the money previously withheld because of my excess earnings?
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.
I’m glad you are asking this question now because there are many things need to be considered before a haste decision. First thing first, the earnings limit for 2018 is $17,040, up from $16,920 in 2017. You are correct to state that any income above $17,040 will be withheld. However, those withholdings will not be a permanent loss. When you do file at the full retirement age (66), the SSA will have a new calculation for you. Secondly, for an early filer, there will be a permanent reduction (25%), and it is a lifetime penalty. In my opinion, this is more ominous than the earing test withholding for at least you can get your withheld money back later. Thus, I urge you to think and calculate carefully. If you are in a good health and have the earing ability, delay the filing for as long as possible. Unless we have a meeting for me to know you better, I would not suggest postponing to age 70 yet.
Certainly there are circumstance may deem an early filing necessary, such as a health issue—dying of cancer, or other urgent matters, but generally filing at your full retirement age is a better option. If you’re single, either through divorce or death, there may be other options for you. Take this time to get acquainted with a CFP or RICP professional for some better options. Best!
You are referring to the retirement earnings test, which only applies to people who start to receive Social Security benefits before their Full Retirement Age (FRA). You FRA is 66 and your monthly benefit at FRA is $2,720. Social Security suspends benefits when people earn above the annual earnings limit, which is $17,040 for 2018. This is not a voluntary suspension, it is “forced suspension”. The benefits will continue to accrue; they will not be permanently taken away. For people who reach FRA in 2018, the annual earnings limit is $45,360. Yes, you are correct. At FRA, there is no earnings limit.