If you want to receive benefits for any months between age 62 and the month before you reach your Full Retirement Age (FRA), your earnings from work (wages or self-employment) must be below certain limits. Once you reach your FRA, there are no limits to what you can earn and still receive your full Social Security retirement benefit.
Simple, right? Well, there are really two different annual earnings limits based on age and one monthly limit that applies only the first year benefits are paid.
First, the annual earnings limit for people who are at least age 62 but will not reach their FRA during the calendar year. For 2009, this limit is $14,160 in gross wages or net self-employment. Any current year earnings over that limit would cause a reduction of $1 in benefits for every $2 over the limit.
Example: John is 63 years old when he decides to reduce his earnings by switching to part-time work in March 2009. He estimates his gross wages for the year will be about $22,160 ($8,000 more than the earnings limit).
If John applies for benefits in January 2009, Social Security will withhold $4,000 (1/2 of $8,000) from his benefits beginning in January before any benefits will be paid to him. If his benefit rate is $1,000/month, he will get full benefits for May-December 2009.
The alternate monthly limit applies only the first year benefits are paid and is $1,180/month in 2009. Since John plans to reduce his monthly earnings in March, he could receive full benefits for March and April if he keeps his gross monthly wages to $1,180 or less each month beginning with March. Social Security applies either the annual or monthly test, whichever pays the most money for the year!
If John keeps his annual gross wages at or below the $14,160 for 2009, he can receive full benefits for the entire year regardless of when he earns the money. He could earn the entire amount in one month or spread out over several months and still receive all his benefits.
All clear? Well what if John will reach his FRA in July 2009? OK, let's assume he will earn $200,000 during the year. We know that there is no earnings limit beginning with his FRA month, but what about the months before his FRA?
The 2009 earnings limit for people who reach their FRA anytime during the year is $37,680. As long as John does not earn more than $37,680 for months before his FRA (January through June), he can claim benefits beginning January. He can earn as much as he wants July on.
These limits change every year so be sure to check the Social Security Online web site before you retire to see what limits will apply to you.
Remember: If you receive a check for a month before your FRA month, your benefits will be permanently reduced by a certain percentage. The most important decision you will make when you apply for Social Security benefits is when to start your benefits. Do your research before you apply!
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My social security is based on my own wages (sparse) over the years. I had a severely disabled son and 4 other children to care for and did not work for 20 years and I have been divorced for over 20 years and am having trouble finding work due to age. I took early retirement because of health and was told I had to take early draw on my ex-husband's retirement also. I did not want to do this but had no choice. I was and am still unable to get clear information on my options and pros and cons of waiting till FRA. Now I read that you can only take early draw on your spouse's (not ex-spouse's record). Also I read that my record should include credit for income we received while married from my husband's work record and our business we ran together. These amounts are not included on my social security record. I would just like some clarity. Now I would have to pay back $10,000 to be able to draw at FRA. Some clarity would be appreciated. I think I get the same lady who has been rude from the beginning even when I call the 800 number. She always hangs up on me. Thanks.
ReplyDeleteAnonymous - I am sorry you are having trouble getting the information you need from Social Security. Your question is complicated so I will answer it in steps:
ReplyDelete1. The age requirements for applying as a spouse and an ex-spouse are the same. Both are payable as early as 62 but the rate is reduced if taken before the spouse/ex-spouse's FRA.
2. Anyone who applies for reduced retirement benefits is required by law to apply for any benefits as a spouse or ex-spouse that may be due. That is why you were told when you applied for your retirement (before your FRA) that you also had to apply for reduced benefits as a divorced spouse.
3. If you had waited until your FRA to apply for retirement then you would have had a choice to apply for either your own retirement or unreduced benefits on your ex-husband's record.
4. Husband and wife businesses commonly report self-employment earnings to the husband's SSN on IRS Schedule SE rather than divide the earnings between the two as partners. To change this now after a divorce would be very difficult and usually requires that your ex-husband sign a statement that he agrees that all or part of the earnings reported to his SSN belong to you as partnership income. If he would not agree to this it is very unlikely that you could get credit for these earnings now.
5. The main advantage to waiting until your FRA to apply for benefits as a spouse is that you could receive 50% of your ex-husband's FRA rate and switch to a (possibly) higher retirement benefit on your own at age 70. Since you already applied for benefits, you cannot do this unless you re-pay all of the benefits you have already received and wait until your FRA to re-apply. Since your health is not good, this may not be a good option for you. If I were doing a Personalized Benefit Analysis for you I would compare your benefit rates and options and would be able to give you a more concrete answer as to the pro's and con's of withdrawing your claims and re-filing at your FRA.
6. You also mentioned a disabled son. If your son is still disabled,was disabled before age 22 and not married, he may be eligible for Social Security benefits on your ex-husband's Social Security record. If he is not receiving benefits, be sure to check with Social Security to see if should apply now.