Dear Rusty: I’m trying to assist my spouse with her rapidly approaching age 62 when she can get her Social Security benefits. Currently she is working almost a full 40-hour week and her 2017 gross earnings were $29,000. If she continues to work, she will probably earn approximately $29500 in 2018. She is also contemplating beginning to work only part time which will reduce her earnings to about 40% of what she currently earns. She is concerned that if she continues to work full time, she will have her monthly SS payment reduced significantly and will not recoup that difference. I understand that if you continue to work full time there will be some reduction in the monthly, but when you finally retire you will get the difference back at your full retirement age. Can you enlighten me/her? Signed: Helpful Husband
Dear Helpful: If your wife starts her Social Security benefits at age 62 and continues to work, she will be subject to Social Security’s annual “earnings limit” ($17,040 for 2018) which, if she exceeds, will result in Social Security withholding benefits of $1 for every $2 she earns over the limit. To use your example, if she earns $29,500 in 2018 she will be $12,460 over the limit and they will withhold all future benefits until they recover the $6230 that is owed from exceeding the limit (see my note below re the first year of collecting). This will continue each year until the year she attains her full retirement age (her “FRA”) when the earnings limit goes way up (about 2 1/2 times the earlier limit) and the withholding is less ($1 for every $3 over the limit); once your wife reaches her full retirement age there is no earnings limit and they will recompute her benefit amount giving her time credit for the number of months they withheld benefits due to exceeding the limit; they’ll then raise her benefit amount as though she claimed benefits later than she actually did. So, over time, the higher benefit starting at her FRA could help her recoup some or all of the benefits withheld – but she doesn’t get that withheld dollar amount back in a lump sum; they just increase her benefit amount at her full retirement age. NOTE regarding the first year of collecting: There is a special rule which applies during the first year SS is claimed so, in your wife’s case, if she claims benefits to start in June, instead of the annual earnings limit she’ll be subject to a monthly earnings limit for the remainder of 2018. After her benefits start, her earnings limit will be $1420/month for the rest of the year and If she exceeds that they will withhold benefits for a following month. The regular annual earnings limit will then go into effect the following year. Social Security requires that you inform them when you will exceed the earnings limit, but if you don’t they will eventually catch up to you when your income tax return is filed. Also, please note that Social Security recommends that you apply for benefits 3 months before you wish them to begin, so if your wife wishes to start her Social Security earlier than her full retirement age, when she applies for her benefits she should select the option to “Start My Benefits Now” in order to have them start as soon as possible.
The information presented in this article is intended for general information purposes only. The opinions and interpretations expressed are the viewpoints of the AMAC Foundation’s Social Security Advisory staff, trained and accredited under the National Social Security Advisors program of the National Social Security Association, LLC (NSSA). NSSA, the AMAC Foundation, and the Foundation’s Social Security Advisors are not affiliated with or endorsed by the United States Government, the Social Security Administration, or any other state government. Furthermore, the AMAC Foundation and its staff do not provide legal or accounting services. The Foundation welcomes questions from readers regarding Social Security issues. To submit a request, contact the Foundation at firstname.lastname@example.org, or visit the Foundation’s website at www.amacfoundation.org.