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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.
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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
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One of our geezers was married to …Read more.
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January: Often the Best Month to File for Social SecurityI write a column similar to this one every January. But I don't mind plagiarizing myself because it contains a very important message for people planning to retire in 2010. January is a critical month for the hundreds of thousands of potential Social Security beneficiaries who are reaching their so-called full retirement age in 2010. The important message: All of them should at least consider the possibility of filing for their benefits this month, even though they may not be reaching their retirement age until later in the year. The reason for this early filing time frame has to do with some quirky and complicated features of Social Security's earnings penalty provisions. Those provisions generally keep seniors who are still working off of Social Security's rolls until they reach that magic "full retirement age." For most people reading this column, your full retirement age is probably 66. Check out the Social Security Administration's website at www.socialsecurity.gov for a chart listing the various full retirement ages. The law essentially says if you are over 62 but under your full retirement age and still working full time, you are not eligible for Social Security. Specifically, the rules require that the SSA deduct $1 from any retirement benefits you might be due for every $2 you earn over $14,160 in 2010. However, the rules say that once you reach your full retirement age, you are due full Social Security benefits, even if you are still working and no matter how much money you are making. Let's follow an example. Let's say Bob was born in July 1944, which means he'll reach his full retirement age of 66 in July 2010. And let's further say Bob generally makes about $60,000 per year and plans to continue working indefinitely. Based on the earnings penalty rules I briefly outlined above, Bob figures he must wait until July (his full retirement age) to begin collecting his Social Security benefits. As I said, at that magical point, the earnings penalty rules no longer apply and he can get his Social Security. And prior to that, he's making way more than the $14,160 income threshold. But here is why Bob should check into applying for Social Security in January.
Bob is going to make $30,000 between January and June (i.e., before he reaches his full retirement age). And that's under the $37,680 threshold for 2010, which means Bob is due benefits beginning in January. He does NOT have to wait until July to apply for his Social Security checks. There is a bit of a catch. By starting his benefits in January, Bob will be accepting a slightly reduced amount. Benefits are reduced roughly one-half of 1 percent for each month they are taken before full retirement age. If Bob's Social Security benefit at full retirement age is $2,000 per month, let's look at his options. Bob's first option is to wait until July (his full retirement age) to start his Social Security benefits. He'll get $2,000 per month for six months or $12,000 for the year 2010. Bob's second option is to file for Social Security in January. Starting his benefits slightly early, his monthly rate is reduced to $1,940. That comes out to $23,280 in total benefits for the year 2010. The downside to option two is his ongoing monthly benefit rate will be $1,940, $60 less than what he would have been getting in option one. But because he'd be receiving about $11,000 less in total 2010 benefits in option one, it would take Bob a long time to make up that loss with his extra $60 per month in ongoing benefits. If I were Bob, I'd choose the second option. I know these rules are complicated and the math in the examples above was difficult to follow. But my overall message is easy to follow: If you're reaching your full retirement age in 2010, talk to a Social Security representative sometime this month to find out if it's to your advantage to file for those benefits in January. 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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