Social Securty questions

[Rogue Hawk]

I am in my 50's, so I guess I had better start thinking about this. I have a few questions.

When someone draws SS, do they have to pay SS-Federal-State taxes on that money or any new money you make?
If you are still working and drawing SS, do they reduce the benefit?
What age can I access my IRA and 401k without penalty?

Oh, and one last thing. You know you better start thinking about SS when you start getting junk mail from AARP:sour:

[Gwolf]

No easy answers...... if you pay taxes and how much you pay will depend on how much you make.

It is all on the Internet. Just start reading.

https://www.usa.gov/about-social-security

[CopperSpyder]

AARP you should join, they can answer all your questions on SS and give you great discounts at hotels, restaurants, car rentals and even motorcycle insurance. So if you get all the answers to your questions on SS now; you will forget what they were by the time you will be able to collect anyway; or everything will have changed I'm sure.

[JohnMc]

IRA non-penalty withdrawals can begin at 59 and one-half
If you wait on SS until your full benefit age, there is no penalty for other income.
You do pay Federal income tax on SS if your total income is above a varying amount.
States vary on whether they levy an income tax against SS. As with Fed the amount depends on total income.

[gkamer]

If you are still working and drawing SS, do they reduce the benefit?


Social Security calculates your
average indexed monthly earnings during the 35 years in which
you earned the most.

You can apply for SS as early as age 62, but your benefit will be somewhat reduced. Full retirement age will depend on your year of birth. For me it was 66. You can continue to work once collecting SS with no reduction in your benefits. Remember, once you apply for Medicare Part B, SS will deduct the Part B premiums for that. For most people that will be $134.00 a month automatically deduced from your benefit.

Don't forget to take Medicare into consideration. You should apply for Medicare Part A and B at 65. At the time you apply for Part A and are still working and covered by your employers health care, you can delay applying for Part B as long as you are covered by your employer. Once your employers health care coverage ends, you have a certain time frame in which to apply for Part B. If you don't apply for Part B in the specified time, you will incur a life long penalty. To avoid the penalty, you have to download a form and have it completed by your employer verifying you were continually covered under their health care plan from the time you were eligible for Part B and when you actually applied for Part B.

For example in my case, I applied for Medicare Part A when I turned 65 in Feb. Since I was still covered by my employers heath care plan, I declined applying for Part B at that time. When I retired in Aug, I then applied for Part B. I had to download a form from the Social Security and have it completed by my former employer verifying I was covered by health care between Feb and Aug, and thus avoided the life long penalty it would have cost me otherwise. You can apply for benefits as soon as, I believe 90 days, prior to your full retirement age, so I did not apply until Dec.

I don't live a state with state taxes. I am collecting a pension from my military retirement as well as from my sheriff's office retirement. Taxes are withdrawn from both those retirement plans. Just to be on the safe side I opted to have 10% of my social security benefit withheld for federal taxes. I'll have to wait until next year to see if I ended up giving Uncle Sam an interest free loan. :)

Hope this helps

[BoilerAnimal]

Social Security calculates your
average indexed monthly earnings during the 35 years in which
you earned the most.

You can apply for SS as early as age 62, but your benefit will be somewhat reduced. Full retirement age will depend on your year of birth. For me it was 66. You can continue to work once collecting SS with no reduction in your benefits.I'm


There are no reductions once you reach your full retirement age.

[UtahPete]

I am in my 50's, so I guess I had better start thinking about this. I have a few questions.

When someone draws SS, do they have to pay SS-Federal-State taxes on that money or any new money you make?
If you are still working and drawing SS, do they reduce the benefit?
What age can I access my IRA and 401k without penalty?

Oh, and one last thing. You know you better start thinking about SS when you start getting junk mail from AARP:sour:

Seriously, the rules may have changed by the time you reach the point you are drawing SS benefits.

They are already changing with respect to drawing from IRA and 401k. Comprehensive bill now being debated by Congress.

Currently SS benefits typically aren't affected by other sources of income, but federal income taxes on SS benefits are.

Medicare has no bearing on the taxability of SS benefits.

This advice is worth what you paid for it....;)

[r1100rider]

Seriously, the rules may have changed by the time you reach the point you are drawing SS benefits.

They are already changing with respect to drawing from IRA and 401k. Comprehensive bill now being debated by Congress.

Currently SS benefits typically aren't affected by other sources of income, but federal income taxes on SS benefits are.

Medicare has no bearing on the taxability of SS benefits.

This advice is worth what you paid for it....;)im drawing at 62 and they will take a dollar for every 2 you make over 17k

[JayBros]

You are smart to begin thinking about it now. Go to ssa.gov and start prowling; there's a wealth of information there and you're going to have to keep track of things as you draw closer to eligibility age. Mary Beth Franklin, https://www.investmentnews.com/staff/mbfranklin, is a widely respected authority on SS benefits. Were I your age I'd buy her book, $30 or so. I do not know the woman or have any connection with Investment News. You will have some important decisions to make as you draw closer.

[BLUEKNIGHT911]

I am in my 50's, so I guess I had better start thinking about this. I have a few questions.

When someone draws SS, do they have to pay SS-Federal-State taxes on that money or any new money you make?
If you are still working and drawing SS, do they reduce the benefit?
What age can I access my IRA and 401k without penalty?

Oh, and one last thing. You know you better start thinking about SS when you start getting junk mail from AARP:sour:

Info today will more than likely change before you retire …… I re-tired at 62, and I decided to start my benefits immed. ( at 62 ) …. you need to do the Math …. because of my total financial situation waiting until I was 72, was a losing proposition …. 10 years of waiting ( with no cash from SS ) meant I would have to collect at the higher benefits they will pay …. for 12 years ( age 84 for me ) to break even. …. from 84 on it would benefit me financially. ….. If I live to be 90 it will be a miracle..... When I computed all this … I didn't even value the fact that for 10yrs I would be getting money I could invest in a ROTH account. …. IMHO the Gov't. counts on you dyeing, within a few years after 72 ….. good luck …. Mike :ohyea:

[Rogue Hawk]

Sounds pretty complicated :shocked: Thanks for the heads up on this stuff. For my IRA and 401K, I have 15% in stock, 85% in various corporate bonds. I hope we don't get another 2008 meltdown. Those Wall Street crooks really ran away with a bundle. I guess they are lucky they are sociopaths, otherwise they would not be able to live with themselves.

[gkamer]

There are no reductions once you reach your full retirement age.

Correct. If you apply for benefits between age 62 and your full retirement age, your benefits will be reduced. I'm not sure by how much. Once you reach your full retirement age, you will receive what ever amount your benefit should be. You may also continue to work, and whatever you are making in your job will not effect your benefit payments.

So for example, if you apply at full retirement age, and your benefit is say $1,564.00 a month, and you're still working at a job making $4,650 a month, your SS benefit will remain at $1,564 dollar a month on top of the $4,650.

[BLUEKNIGHT911]

Correct. If you apply for benefits between age 62 and your full retirement age, your benefits will be reduced. I'm not sure by how much. Once you reach your full retirement age, you will receive what ever amount your benefit should be. You may also continue to work, and whatever you are making in your job will not effect your benefit payments.

So for example, if you apply at full retirement age, and your benefit is say $1,564.00 a month, and you're still working at a job making $4,650 a month, your SS benefit will remain at $1,564 dollar a month on top of the $4,650.

Yep, your benefit will remain the same - but your TAXES on that amount WON"T ….. it can rise significantly …. that's the catch 22 ….. do the math ….. Mike :ohyea:

[rtotten]

If you have Tricare for Life (Retired Military) that changes the whole Medicare ballgame... you don't need any supplements. I started my SSA at 62 because if I waited it was a losing proposition like Mikes (BlueKnight911)

[Navvet]

If you have Tricare for Life (Retired Military) that changes the whole Medicare ballgame... you don't need any supplements. I started my SSA at 62 because if I waited it was a losing proposition like Mikes (BlueKnight911)

Amen brother !!!

[Navvet]

AARP you should join, they can answer all your questions on SS and give you great discounts at hotels, restaurants, car rentals and even motorcycle insurance. So if you get all the answers to your questions on SS now; you will forget what they were by the time you will be able to collect anyway; or everything will have changed I'm sure.

Research that carefully, some people do not agree with the political parties AARP supports.

AMA might be a better organization to support.

[SpyderAnn01]

I’m contemplating this as well, I have a pension that I guess I can draw now and I can take SS early next year. I likely will opt to start SS at 62 because I don’t really think I’ll live long enough to make waiting for full retirement at 66 worthwhile. In my case it is $500 less per month if I draw at 62 vs 66. You can access your information online.

[Navydad]

Find a reputable financial adviser in your area and pay him a visit. Most are more than willing to take time to answer your questions in hopes of landing a future client. I have a great one and he answers all my questions and takes great care of my finances including health insurance. I retired at 56 and started drawing from my 401K with ZERO penalties. There were a few hoops I had to jump through to do this, but then again, find a guy who knows the ropes. I took my SS at 62. I do pay income taxes on all of my income, but hey, I'm retired and loving it. I was fortunate enough to retire with a tidy amount and I still have that tidy amount plus more. Not everyone likes to pay an adviser, but he has done right by me so I have no problem with it. I have to pay anyone else who does work for me.

[SPECTACUALR SPIDERMAN]

I would really recommend if you want to know what is best for you, ask your accountant or aarp for a referral of who to talk to about your specific
questions & needs.

[Rogue Hawk]

I am hoping I can stay in my field until I retire. I am a software engineer. Eventually Artificial Intelligence will render me obsolete. I hope I can stay in the game at lest till 70. I got a late start saving for retirement.

[IdahoMtnSpyder]

im drawing at 62 and they will take a dollar for every 2 you make over 17k
Until you reach full retirement age, 66+ for you.

[IdahoMtnSpyder]

Sounds pretty complicated :shocked: Thanks for the heads up on this stuff. For my IRA and 401K, I have 15% in stock, 85% in various corporate bonds. I hope we don't get another 2008 meltdown.
Take a serious look at target retirement funds like those at Vanguard. The investment mix is automatically changed each year as you get closer to the retirement target date.

[IdahoMtnSpyder]

Info today will more than likely change before you retire …… I re-tired at 62, and I decided to start my benefits immed. ( at 62 ) …. you need to do the Math …. because of my total financial situation waiting until I was 72, was a losing proposition …. 10 years of waiting ( with no cash from SS ) meant I would have to collect at the higher benefits they will pay …. for 12 years ( age 84 for me ) to break even. …. from 84 on it would benefit me financially. ….. If I live to be 90 it will be a miracle..... When I computed all this … I didn't even value the fact that for 10yrs I would be getting money I could invest in a ROTH account. …. IMHO the Gov't. counts on you dyeing, within a few years after 72 ….. good luck …. Mike :ohyea:
The way I see it that was the one screw up the Reagan Administration made back in 1983 when they reformed the SS system. Benefits for retiring early weren't changed enough to make the crossover age an incentive to keep working and retire later. The crossover age before and after the 1984 change stayed at around 78 - 80.

Life expectancy has always been factored into the SS program. So yes, they do count on a certain percentage of beneficiaries dying at every age above retirement age. You don't need to opine that that is what they do, because in fact that is what they do!

[Gwolf]

If you don't remember anything else about it, just remember that you are not gonna live very well on just social security. It might be enough to keep you alive in a cheap place and watching the budget carefully. If you want to enjoy retirement, you need other sources of income at least equal to what you will get from social security. You should think of social security as something in addition to your primary retirement plan.

[bikerbillone]

I would recommend your accountant, aarp, not so much, your choice.

[canamjhb]

You can plan and research now. But everything will most likely change by the time you are eligible for SS. The biggest thing to consider is how long you think you may/probably will live. Your individual past health history is different from everyone else's. Keep in mind any money you earn after drawing SS is subject to SS withholding. Even small amounts of earnings are taxed but most likely will have no effect upon your SS earnings. All earned income is subject to SS withholding unless you are exempt. It is money down a "rat hole". Several years after I retired and began drawing SS, I got a PT job just to keep busy and provide for a little farkeling money. The employer was required to withhold SS. I contacted SS and requested to "opt-out" from withholding. After all, it is MY MONEY and I will never see any return of it.... EVER. I found it that it is "the law" and I have no options. Hard pill to swallow. Just another way for the government to get our money to try to cover up for their mismanagement of our money paid into the SS system..... Jim

[IdahoMtnSpyder]

The employer was required to withhold SS. I contacted SS and requested to "opt-out" from withholding. After all, it is MY MONEY and I will never see any return of it.... EVER. I found it that it is "the law" and I have no options. Hard pill to swallow. Just another way for the government to get our money to try to cover up for their mismanagement of our money paid into the SS system..... Jim
I believe you may have a misunderstanding of what SS is intended to be, and is. First, it is not, never was intended to be, and never will be, a retirement savings program. But that is what politicians and anti-government commentators want you to think it is. It is an insurance program, kind of like term life insurance. You put money in a pool and when you die the beneficiary collects, if you have made all the required payments. Quit making payments and it's gone. You have no claim to it. Now, how does that apply to SS?

The official name for Social Security program is Old Age, Survivors, and Disability Insurance Program. The concept and operation is, money that goes into the fund today pays for the claims against the fund today. Income above payouts is invested in Government securities. Those securities are used to fund current government spending, hence the thinking that SS money has been absconded from the SS fund to pay for government programs. In order to collect benefits from an insurance fund you must meet specified criteria. In the case of SS that is usually reaching retirement age and be living. You can also collect benefits if you meet disability criteria. Your survivors can collect benefits when you die. There are several variations in the criteria for when a survivor qualifies for benefits. Originally the SS program included unemployment insurance but that was spun off into its own program shortly after SS was implemented.

In short SS is an insurance program that all earners pay into, and all qualified claimants draw out of. After you pay the premium from your paycheck it is no longer your money. But when you meet the criteria to be a claimant, then you are entitled to receive payments from the fund. I'll say it again. It is not, and never has been, a retirement savings program.

[Rogue Hawk]

Is there a maximum amount someone pays into the system and then the tax stops?

[LongIsland]

Is there a maximum amount someone pays into the system and then the tax stops?

It changes each year. This year the max salary is $132,900. Any earnings above that do not pay into SS. Medicare has no maximum, everyone pays no matter income.

[al0vely]

I’m contemplating this as well, I have a pension that I guess I can draw now and I can take SS early next year. I likely will opt to start SS at 62 because I don’t really think I’ll live long enough to make waiting for full retirement at 66 worthwhile. In my case it is $500 less per month if I draw at 62 vs 66. You can access your information online.

I plan to do the same as Ann ... draw SS at 62. I feel like I have worked all my life - lived on a farm, got summer jobs from age of 14 thru HS graduation, worked thru college and ever after ... I am tired of working a real job. From 62 - 65 I will supplement my SS with non-taxable income from savings resources - estimates today say I should have enough to live on for 15-20 good years until I don't need so much money.

I must admit I am worried about the roller coaster of a stock market we have - and hope we don't take a big bath on it before I can get out of it.

[IdahoMtnSpyder]

I must admit I am worried about the roller coaster of a stock market we have - and hope we don't take a big bath on it before I can get out of it.
Hence the advisability and need for a balanced portfolio. As the old saying goes, don't put all your eggs in one basket! That's why target retirement funds are good. They balance your fund toward less risky investments as you get older.

[Jaxfann]

Take a serious look at target retirement funds like those at Vanguard. The investment mix is automatically changed each year as you get closer to the retirement target date.

VERY VERY good advice!

[Jaxfann]

Hence the advisability and need for a balanced portfolio. As the old saying goes, don't put all your eggs in one basket! That's why target retirement funds are good. They balance your fund toward less risky investments as you get older.

VANGUARD is the way to go - lowest costs and best funds - cost matters - 1% is actually 16.6% of what you expect to make with a conservative diversified portfolio - you are giving it away every month to a financial advisor and less than 20% beat the averages every year and very few do it every year for 5 years - Vanguard (not for profit - owned by you the investor) retirement funds do it all and the fees are rock bottom and the results are top tier in most funds.

[h0gr1der]

One thing that goes hand in hand with SSA retirement is Medicare. You are required to pay into both SSA and Medicare (FICA1 and FICA2), and there are rules that are partially obscure. After all, if you don't take your benefits, there's more to give away! Several instances I've seen that deserve mention.

First, when you become Medicare eligible, if you decide not to take the whole alphabet (Parts A, B, and D). Later you decide to get on board, and guess what? There's a penalty that you have to pay forever as long as you keep the part you opted not to take in the beginning, which pretty much amortizes (for the government) the cost over time. Lesson-Look very hard at what Medicaid package you take, the little bit of savings may not be worth it.

Second, if you refuse part D (Drug Coverage) thinking that you'll use the $4.00 prescription plan that everyone offers. I knew of an older gentlemen that didn't have part D, and guess what? The $4.00 plan doesn't cover chemotherapy, which is very expensive. His bill totaled about $200K by the time he was done.

And a final note on coverage. There are many supplemental plans that cover the 20% that Medicare doesn't pay. There are Medigap plans and Advantage plans. These help defray the cost of catastrophic illness, and they are wildly divergent in cost. The dreaded $1,000,000 illness (cancer, brain, etc) can leave you owing up to $200K. Too much to take in all at once, but you are wise to start studying it many years before you need it. https://www.investopedia.com/articles/personal-finance/071014/medigap-vs-medicare-advantage-which-better.asp

[BLUEKNIGHT911]

Excellent advise …" Hog " …………. Mike :ohyea:

[Motorcycledave]

I am in my 50's, so I guess I had better start thinking about this. I have a few questions.

When someone draws SS, do they have to pay SS-Federal-State taxes on that money or any new money you make?
If you are still working and drawing SS, do they reduce the benefit?
What age can I access my IRA and 401k without penalty?

Oh, and one last thing. You know you better start thinking about SS when you start getting junk mail from AARP:sour:

Laws vary on your retirement so if I were you I would go find a good money manager/ retirement expert
and go from there, they made me draw my 401 K at 70 if you work after retirement yo will have to pay into SSI
from that income.

[IdahoMtnSpyder]

they made me draw my 401 K at 70
That was done so people couldn't just accumulate money tax free and then pass it on to their survivors. Reagan's argument was essentially, "We'll let you save for retirement and not pay taxes on that money until you retire, but you WILL pay taxes on it someday!" That requirement is what led to the Roth IRAs, pay taxes now but not on the withdrawals later.

[Bob Denman]

Three years, and nine Months to go for me... Full benefits: baby! :clap::yes::yes::yes:

[srx660]

One thing i did when i retired at 66, 3 years ago, was to enroll in a humana gold plus plan to handle my medicare. For some people humana doesn't work but in my case it does. My medicare expenses are about $19 my cost, and humana pays for the rest($110). When i add in the other benefits of humana, part B and part D, The cost of medicare gets close to 0. Got tired of staying home so i started a handiman service. I do pay taxes on my income but get it all back when filing the return (haven't hit the limit yet, on purpose). Since i have Switched my retirements to a IRA i now have to take out a small percent( think its 3.2%) out of my IRA and pay taxes on it. Have to do this because i have reached the age of 70 & 1/2.

[Jeriatric]

I’m contemplating this as well, I have a pension that I guess I can draw now and I can take SS early next year. I likely will opt to start SS at 62 because I don’t really think I’ll live long enough to make waiting for full retirement at 66 worthwhile. In my case it is $500 less per month if I draw at 62 vs 66. You can access your information online.

And all this time I thought you were in your 40's nojoke

[Jeriatric]

Youngins take note. A little financial pain(saving) over the years while you're young and full of it, beats the holy heck out of being cash strapped in retirement. Think about it.

[bhern]

You've gotten a lot of input, so I just wanted to add/encourage you to consider making Roth contributions a part of your strategy; you mentioned that you are getting a bit of a late start, and they're a great way to tackle that. As opposed to a traditional IRA, which accumulates tax deferred, but then requires the payment of taxes upon withdrawal, plus the mandated minimum distributions at the age of 70.5, a Roth IRA is taking after-tax money which both accumulates AND is drawn down tax free, and there are no minimum distribution requirements -- ever. (The rare case where it really is your money!)

Point being, if you can squeeze out the extra cash while you're still working now, the Roth could give you a bit of extra altitude to work with so that you can let your 401(k) (or IRA, if you roll it over) keep on in full accumulation mode until you have to start taking those distributions. Being over 50, you also can take advantage of the "catch-up" provision in the tax code -- allows you to invest an extra $1000 per year in your IRA, Roth or traditional. Limit is $7,000 this year. There are a couple of minor caveats/things to deal with -- similar to traditional IRAs, you have the 59.5 starting point for any tax-free withdrawals, there are some income limits (ranging from around $125-130K if filing single, $190K if married) to be able to take advantage, and the Roth has to be established for 5 years before any withdrawals can be taken tax free, so set it up now...)

[SPECTACUALR SPIDERMAN]

How many like myself are planning when retiring to get out of you high tax state and moving somewhere more livable? i plan on trading my
$12k property tax to $2,500.

[Rogue Hawk]

You've gotten a lot of input, so I just wanted to add/encourage you to consider making Roth contributions a part of your strategy; you mentioned that you are getting a bit of a late start, and they're a great way to tackle that. As opposed to a traditional IRA, which accumulates tax deferred, but then requires the payment of taxes upon withdrawal, plus the mandated minimum distributions at the age of 70.5, a Roth IRA is taking after-tax money which both accumulates AND is drawn down tax free, and there are no minimum distribution requirements -- ever. (The rare case where it really is your money!)

Point being, if you can squeeze out the extra cash while you're still working now, the Roth could give you a bit of extra altitude to work with so that you can let your 401(k) (or IRA, if you roll it over) keep on in full accumulation mode until you have to start taking those distributions. Being over 50, you also can take advantage of the "catch-up" provision in the tax code -- allows you to invest an extra $1000 per year in your IRA, Roth or traditional. Limit is $7,000 this year. There are a couple of minor caveats/things to deal with -- similar to traditional IRAs, you have the 59.5 starting point for any tax-free withdrawals, there are some income limits (ranging from around $125-130K if filing single, $190K if married) to be able to take advantage, and the Roth has to be established for 5 years before any withdrawals can be taken tax free, so set it up now...)

I will look into that I have some cash doing nothing