Q: I am 64 years old. I retired last year and decided to file for my Social Security in November. I got my first check in December. But now Iβve been offered a job that will pay me a rather substantial amount of money for short periods of time. Specifically, I would make $40,000 in May of this year and then another $40,000 in October. I realize that $80,000 is well over the earnings penalty limit of $15,720. But since I am only working two months of the year, can I keep my Social Security checks for the other 10 months?
A: No you canβt. Before I explain, let me tell you right up front that you really need to think about withdrawing that Social Security claim you filed last year. I am normally not a big fan of advising people to withdraw a previously filed Social Security claim. But your situation seems tailor-made to employ that strategy. So now let me go over all the rules that will help you understand why a claims withdrawal might be your best option.
The earnings penalty rules say that if you are under age 66 and working and earning more than $15,720 per year, then an amount equal to half of anything you earn over that limit must be withheld from your Social Security checks. Your anticipated $80,000 income puts you $64,280 over the earnings threshold. So half of that, or $32,140, must be deducted from your 2016 Social Security benefits. You didnβt give your benefit rate, but Iβm sure that would be all the benefits you are due this year.
Normally, you might be protected by something called the βfirst year of retirement rule.β What that rule says is that in the first year you start getting Social Security benefits, you are guaranteed a full Social Security check for any month you earn less than $1,310. (Thatβs one-twelfth of the $15,720 limit.) In other words, because you are only earning money in May and October (albeit $80,000), you would still be due your Social Security benefits for the other 10 months of 2016.
However, youβll note that provision is called the first year of retirement rule. And, unfortunately, because you got Social Security checks for November and December last year, that makes 2015 your first year of retirement. And that means the special monthly earnings exception cannot be used in 2016. So again, your anticipated $80,000 in annual income counts against you for the whole year. In other words, not only are you not due any future benefits this year, but you were not due any of the benefits you already received for 2016.
So, what can you do about this? Well, youβve got two options. You could just let your current claim ride out. Assuming youβre going to keep working like this for the next several years, you wonβt be due any more benefits until age 66. Thatβs when the earnings penalties go away. At age 66, your Social Security checks will start up again, and they will be refigured at that time to remove the original reduction you took for early retirement. As part of this deal, you will have to write a check to the Social Security Administration to repay them for those 2016 benefits you already received that you are not due. (You would be able to keep the 2015 benefits.)
Because you have to write that check anyway, thatβs what makes your other option, the claims withdrawal option, more attractive. You would call SSA at 800-772-1213 and tell them you want to withdraw that claim you filed last November. (You have 12 months to withdraw a claim.) As part of this process, you will have to repay all benefits youβve received. Because you will have to repay all 2016 benefits anyway even if you go with the first option, youβll only have to pony up an extra two monthβs worth of benefits (the checks you got for November and December 2015) to complete the withdrawal process.
With a withdrawal, youβll essentially have a clean slate when it comes to your Social Security. Then you can refile for full benefits at age 66. Or, if this lucrative job of yours continues, you might want to consider putting off filing for Social Security until age 70, when you would get a 32 percent βdelayed retirement bonusβ added to your monthly checks.
Q: My husband died quite a few years ago, and I have been getting widowβs benefits since age 60. I plan to switch to my own Social Security when I am 66. But I will be 65 in July, and I am concerned about Medicare. When I apply for Medicare, should I do so under my husbandβs Social Security number or under my own number?
A: You have nothing to be concerned about. Because you are already getting Social Security benefits, you will be automatically enrolled in the Medicare program when you turn 65. Sometime in May or June, you will get your Medicare card in the mail. That card will say that your Medicare coverage begins July 1, 2016. You donβt have to do anything but put the card in your wallet or purse.
Because you are currently claiming widowβs benefits on your husbandβs record, the number shown on your Medicare card will be your husbandβs Social Security number with a the letter βDβ behind it. (That is the symbol Social Security uses for widowβs benefits.)
Sometime shortly after you apply for your own Social Security benefits at age 66, you will get a new Medicare card that will have your own Social Security number on it, followed by the letter βA.β (That is Social Securityβs symbol for retirement benefits.)
Here is one more thing you might want to think about. If you can afford to do so, you could wait until you are 70 years old to switch to your own Social Security. At that age, you would get a 32 percent βdelayed retirement bonusβ added to your monthly Social Security checks.
