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Social Security - Options for High Wages

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Marc Kiner
Marc Kiner

Good Saturday morning ,

Thought you would be interested in this post to the Social Security Group. 

A writer from Money magazine called on Friday.  She raised the following question:

Four months after beginning SS benefits at age 62, an individual takes a job paying compensation for $100,000 per year.  What are his/her options? 

I discussed the following three options:

1) "Do Over" - He can repay all of the benefits received and withdraw the application.  He must repay 100% of benefits received, but is not assessed any interest or penalty.   By withdrawing his application, he can file another application at any time.   

2) Suspend his benefits.  Under this option, he will contact the SSA and request this his benefits be suspended.   SSA will discontinue the monthly benefit checks.  He can resume his benefits at any time.  If under FRA when benefits are resumed, benefits will remain at age 62 reduced level until he turns FRA.  At FRA, the SSA will adjust the benefits to reflect the benefit checks that were not received.  Of course, he is entitled to the Delayed Retirement Credits if benefits are resumed after FRA.

3) Notify the SSA this his wages will be too high to receive a benefit.  In this situation, the SSA will withhold benefits due to the earnings amount.  Benefits will be resumed when  earnings are at a level whereby a benefit is payable.   If under FRA when benefits are resumed, benefits will remain at age 62 reduced level until he turns FRA.   At FRA, the SSA will adjust the benefits to reflect the benefit checks that were not received.  Of course, he is entitled to the Delayed Retirement Credits if benefits are resumed after FRA.

 The only real difference between option 2 and 3 is if the individual stops work.  Under option 2, if he suspends his benefits and stops work SSA will not resume benefits until he asks them to start them again.  Under option 3, SSA will start or pay any benefits based upon reported wages so the benefits may not be totally stopped depending on the amount of the earnings.  This report can come from the individual or IRS. 

She asked what I would recommend.   If funds are available, I recommend the first option.    By withdrawing the application and waiting to Full Retirement Age, the "restricted application" and "claim and suspend" filing strategies will be available.  Thus, by waiting to FRA, he will have more options and can utilize additional filing strategies to maximize benefits.   Additionally, if he resumes benefits prior to FRA, the benefits will be adjusted to reflect the lower reduction factor, thereby increasing his benefits prior to FRA.

This question has been raised several times over the last couple weeks.  Please e-mail me at mkiner@mypremierplan.com or call 513-351-5707 to discuss.

As always, I encourage you to be proactive as you meet with clients this filing season.  Do not hesitate to ask about Social Security.  Help your clients to "Make a Plan".  They will be happy that you took the time to discuss their Social Security benefits.

Regards,

Marc Kiner, iShade.com Faculty, iShade.com Social Security Group Moderator

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