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What's Best for Mom in a Mom-and-Pop Business?
Q: My wife and I are in our 30s. We're partners in a business that nets us about $80,000 per year. What's the best way to report our income on our tax returns to maximize our Social Security benefits?
A: Even though you're asking about your future …Read more.
Bleeding Hearts and Bootstraps
Q: I was surprised by the woman who wrote to you and said that people living on a small amount of Social Security were just lazy. Let me share my story to help this callous woman understand why people like me don't get very much from Social Security.…Read more.
Don't Base Critical Decisions on Prophets of Doom
Q: I'm about to turn 66. I want to put off starting my Social Security until age 70 because if I do, I'll get an extra $600 or so per month in a delayed retirement bonus added to by Social Security checks. But my husband said I should take my Social …Read more.
Geezers and Floozies
Q: I'm part of a group of old geezers who gets together every week at the local coffee place. Social Security is a frequent topic of conversation. At our last meeting, the subject of benefits for divorcees came up.
One of our geezers was married to …Read more.
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Arf! Arf! Barking up the Right Social Security TreeQ: I made an appointment to talk to someone at my local Social Security office about filing for Social Security benefits. All I wanted was general information to help make plans for my future retirement. But she tried to talk me into filing for Social Security now, telling me it could work to my advantage. I was so baffled that I left the office more confused than I ever have been about Social Security. One part of the mystery is she kept using a term that I swear sounded like a barking dog! Something like "ruff." Can you help? Here are the particulars of my case. I just turned 62 in January. Even though I cut back my work hours, I am still making about $45,000 per year. My Social Security benefit estimate at age 66 is $2,200. My rate at age 62 would be $1,650. A: ARF! ARF! ARF! And no, that's not a dog barking. It's a little known quirk in Social Security law that has benefited millions of beneficiaries over the years and could work to your advantage, too. ARF is Social Security Administration jargon for "adjustment to the reduction factor." It's a policy that requires your reduced retirement benefit to be refigured at age 66 to give you credit for those months when you did not get a Social Security check because of your work and earnings. Here's another way to look at it. If you take reduced retirement benefits at age 62, that benefit would come with a 25 percent early retirement penalty. And normally, that reduction is permanent, staying with you for the rest of your life. But if you are still working between age 62 and age 66, your earnings could cause you to forfeit some of your monthly Social Security benefits. (The law says that $1 must be deducted from your Social Security benefits for every $2 you earn over $14,160 per year.) And for any month you don't get a Social Security check because of your excess earnings, the ARF rule says you cannot be penalized with an early retirement reduction for that month. So, when you reach age 66, they adjust your benefit (i.e., raise the amount of your monthly Social Security check) by removing the reduction factor for the months involved. Now we'll get even more specific with an example using the information you provided. Let's say you take Social Security at age 62.
In other words, because of the earnings penalty, you would get only two full Social Security checks and one partial check for the year. And let's say you keep doing that until age 66. Once you reach age 66, the earnings penalty goes away and you would be due all your Social Security checks. That means you would collect eight full Social Security checks and four partial Social Security checks between age 62 and 66. And when you reach age 66 and the ARF rule kicks in, your ongoing benefit will be refigured. Instead of the initial 48-month early retirement reduction resulting in a 25 percent penalty, you will have only an eight-month reduction resulting in a roughly 4.5 percent penalty. Finally, let's look at your Social Security options. Option One: You could wait until age 66, and at that point begin receiving $2,200 per month. Option Two: You could take benefits at age 62 with an initial 25 percent reduction and be due $1,650 per month. But because of the earnings penalty rules explained above, you would only receive eight full Social Security checks and four partial Social Security checks between age 62 and 66, totaling $17,520 (or $4,380 per year times four years). And at age 66, your monthly benefit would be adjusted to an ongoing rate of about $2,100 per month. Option Two (the ARF option) looks pretty attractive to me. You'd get $1,520 in Social Security benefits you would not get in Option One. And with an ongoing Social Security benefit rate that's only $100 more per month, it would take you a long time to make up that difference if you waited until age 66. I say you should bark up that age 62 Social Security tree! If you have a Social Security question, Tom Margenau has the answer. Contact him at thomas.margenau@comcast.net. To find out more about Tom Margenau and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com. COPYRIGHT 2010 CREATORS.COM.
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