[stock-ticker]

Social Security Q&A: Are My Benefits Enough to Retire Now?

SS photo cropped

Question: I would like to retire at 60. I am 59-and-a-half this year. My husband and I were married for four years. He passed away when he was 57 and never applied for Social Security. I receive a pension from his employer for $989 a month until I die. His benefits, as of now, would be about $1,440 a month, per Social Security. Mine are about $800 a month, according to Social Security.

I hate the job that I had to take after I was fired from my job of 14 years. Can I retire at 60 in the first place? And when Social Security tells me his benefits would be $1440, is that after the early retirement deduction or before? Also, how much can I earn if I have to go back to work to make ends meet?

Answer: Very sorry to hear about your husband’s passing. It may be best for you to take a reduced retirement benefit at age 62, and then at full retirement age, take your widows benefit.

Or it may be best to take your reduced widows benefit starting at 60 and your own retirement benefit at 70. I can’t tell from the numbers you include whether these are reduced or full retirement benefit amounts, called Primary Insurance Amounts. Very sophisticated software can tell you what strategy is best.

Any calculation must fully incorporate the earnings test so you can see the impact that working more and earning at different levels will have on your lifetime benefits. You are compensated for benefits lost due to the earnings test with an upward adjustment of your benefits starting at full retirement age. The problem is that the adjustment (called the adjustment of the reduction factor) is made only with respect to the benefit you were receiving at the time you were hit by the earnings test. If you flip to another benefit, the adjustment won’t carry over — meaning the earnings test will really cost you money.

For someone whose full retirement age (FRA) is 66, their Social Security benefit is now reduced by $1 for every $2 in earnings (including earnings in non-covered employment) that exceed $15,480 while they were aged 62 to 65. During the year they turn 66, their benefit is reduced by $1 for every $3 in earnings that exceed $41,400, and only earnings in the months before reaching FRA are counted. These are 2014 trigger levels; the levels change every year to reflect national wage trends.

Benefit reductions are not pro-rated during the year; they’re front-loaded. This can wreak havoc with your budget. For example, if outside earnings reduce someone’s annual benefits from $18,000 to an annual benefit of $12,000, her $1,500 monthly payment would not be reduced to $1,000 for an entire year. Instead, she would get zero Social Security payments for four months and then the $1,500 payment for eight months.

_________

When it comes to personal finance, economics and our software care about one thing—your living standard. All questions in personal finance boil down to your living standard. Your decision about when and how to take Social Security can affect your living standard throughout your retirement.

I am a professor of economics and I’ve spent a good part of my academic career studying personal financial behavior. Here’s why my colleagues and I developed Maximize My Social Security. Deciding, on your own, which Social Security benefits to take and in which month to take them is incredibly difficult. Most households face millions of options. You can easily lose tens of thousands of dollars making the wrong choices.

My company’s software, Maximize My Social Security, can help you avoid costly mistakes and instead discover your maximized lifetime household benefits.

Share This Post

Related Articles

Powered by WordPress · Designed by Theme Junkie
Facebook IconTwitter Icon