Social Security/income in year before hitting 62

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2021retiree
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Social Security/income in year before hitting 62

Post by 2021retiree »

I’m not sure I’m putting this in the right place. Please feel free to move if not.
I am a federal retiree and I get a social security like “supplement” until I hit 62.
If I work and make more than the amount allowed before social security is impacted when I’m 61, and I’m not planning to take social security at 62, is there anything “negative” that I should be aware of?
I’m assuming that I can earn more than 20K when I’m 61, and it won’t impact the amount I get from social security if I decide to claim when I’m say 65?
Thanks
Silk McCue
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Re: Social Security/income in year before hitting 62

Post by Silk McCue »

Welcome to the forum with your first post since joining.

I believe you are under a mistaken notion regarding income negatively impacting your Social Security benefit.

If you claim SS before reaching your FRA (Full Retirement Age) which will be 67 for you and have employment income exceeding a SS established limit ($19,560 for 2022) your benefit can be temporarily reduced but you will be made whole once you reach FRA. Please take time to read SS this page on this topic.

https://www.ssa.gov/benefits/retirement ... rking.html

What you earn at age 61 that is considered employment income never matters in this scenario. Neither does any income you earn in any year prior to claiming SS prior to FRA.

Cheers
Weathering
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Re: Social Security/income in year before hitting 62

Post by Weathering »

OP,
I understand where you are coming from (I’ll be in the same position in 6 years). Your “supplement”, between ages 57-62, from the federal govt is reduced if you earn more than a specific amount. Earnings are measured by the prior year tax return. So, it’s possible to earn more than the limit at age 61 because the supplement will stop at age 62 (I.e., last measurement will be age 60 earnings). These earnings at age 61 will not negatively impact social security in any way. As the other poster mentioned, you could also work during ages 62 to 67 if you wish, with only a positive benefit to your social security.

In my case, if I retire from govt service at age 57 and go to work for a defense contractor, then I will not get a supplement from the government due to my earnings. I’ll still get my annuity/pension, but not the supplement. I’ll decide about my path forward when I reach age 57.

I’m glad you asked this question.
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grabiner
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Re: Social Security/income in year before hitting 62

Post by grabiner »

Note that if your earnings do reduce the SS you receive, this is not a loss, as it will be made up as if you had delayed your claim. For example, if you claim SS at 62, and lose one year of benefits to the earnings limit, your benefit will be recalculated as if you had claimed SS at 63.

In contrast, the FERS annuity supplement is a total loss if you go over the earnings limit, effectively a marginal tax rate of 50% plus your regular rate until your benefit drops to zero. You don't get a larger FERS annuity as a result of losing some of the supplement.
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2021retiree
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Re: Social Security/income in year before hitting 62

Post by 2021retiree »

Thanks everyone.
Since my FERS supplement ends at 62, I am not at risk of losing it if I make more than $20K the year I am 61, correct?
And I assume my social security will be recalculated based on earnings after retirement from the feds, which in my case is probably a good thing. (I didn’t make much at the start of my career decades ago).
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grabiner
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Re: Social Security/income in year before hitting 62

Post by grabiner »

2021retiree wrote: Sat Oct 01, 2022 9:01 am And I assume my social security will be recalculated based on earnings after retirement from the feds, which in my case is probably a good thing. (I didn’t make much at the start of my career decades ago).
Social Security benefits are based on an average of the 35 highest years' adjusted earnings (up to the cap amount). So you will increase your benefit, even if you have worked more then 35 years, if your salary at age 61 exceeds the inflation-adjusted amount you earned at age 26.
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Re: Social Security/income in year before hitting 62

Post by MOBugeater »

2021retiree wrote: Sat Oct 01, 2022 9:01 am Thanks everyone.
Since my FERS supplement ends at 62, I am not at risk of losing it if I make more than $20K the year I am 61, correct?
I believe this is correct. The supplement comes from OPM, not SS. Your base annuity is never reduced so in that last year before 62, I think you can earn over the limit and not have a supplement reduction, because your supplement has gone away.
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Re: Social Security/income in year before hitting 62

Post by Kal1981 »

Weathering wrote: Fri Sep 30, 2022 6:12 pm OP,
I understand where you are coming from (I’ll be in the same position in 6 years). Your “supplement”, between ages 57-62, from the federal govt is reduced if you earn more than a specific amount. Earnings are measured by the prior year tax return. So, it’s possible to earn more than the limit at age 61 because the supplement will stop at age 62 (I.e., last measurement will be age 60 earnings). These earnings at age 61 will not negatively impact social security in any way. As the other poster mentioned, you could also work during ages 62 to 67 if you wish, with only a positive benefit to your social security.

In my case, if I retire from govt service at age 57 and go to work for a defense contractor, then I will not get a supplement from the government due to my earnings. I’ll still get my annuity/pension, but not the supplement. I’ll decide about my path forward when I reach age 57.

I’m glad you asked this question.
Where can I find the guidance regarding FERS supplement and income "restrictions"?
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Re: Social Security/income in year before hitting 62

Post by Kal1981 »

For those who retire at MRA and collect the FERS supplement, do you subsequently collect SS at 62 or do you wait until 67 or 70?
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Re: Social Security/income in year before hitting 62

Post by grabiner »

Kal1981 wrote: Wed Mar 29, 2023 11:58 am Where can I find the guidance regarding FERS supplement and income "restrictions"?
The FERS annuity supplement information is at https://www.opm.gov/retirement-center/f ... Supplement
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Re: Social Security/income in year before hitting 62

Post by grabiner »

Kal1981 wrote: Wed Mar 29, 2023 3:02 pm For those who retire at MRA and collect the FERS supplement, do you subsequently collect SS at 62 or do you wait until 67 or 70?
It is the same choice for federal retirees as for any other retirees, as SS doesn't interact with the rest of the federal retirement system (other than the fact of the pension making it more likely that 85% of any SS will be taxable). It is usually best for singles in good health, or the higher-earning spouse in a couple, to wait until 70 and draw more from the TSP or other savings while waiting.
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Re: Social Security/income in year before hitting 62

Post by Kal1981 »

Thanks grabiner.
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Re: Social Security/income in year before hitting 62

Post by Kal1981 »

I used calculator.net and ran 2 different retirement age. One is at MRA collecting FERS+Supplement then SS at 62. The other is at age 67 collecting FERS+SS. It looks like retiring at 57 makes the most financial sense if I don’t live past 95, and most actuarial tests I’ve taken indicate I have 74% to live to age 84 and 50% to 92. Does this forecast look about right? Or did I miss something? Image
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Re: Social Security/income in year before hitting 62

Post by grabiner »

Kal1981 wrote: Wed Mar 29, 2023 7:00 pm I used calculator.net and ran 2 different retirement age. One is at MRA collecting FERS+Supplement then SS at 62. The other is at age 67 collecting FERS+SS. It looks like retiring at 57 makes the most financial sense if I don’t live past 95, and most actuarial tests I’ve taken indicate I have 74% to live to age 84 and 50% to 92. Does this forecast look about right? Or did I miss something? Image
What you are looking at assumes that you work longer. If you retire at 57 and stop working, you get five years of FERS supplement whether you claim SS at 62, 67, or 70, so the FERS supplement is irrelevant to the calculation. If you keep working until 62 in a non-government job, you lose the FERS supplement, although you likely get more money to invest, and you will probably increase your SS benefit by replacing low-earning years early in your career by high-earning years.
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Re: Social Security/income in year before hitting 62

Post by Kal1981 »

grabiner wrote: Wed Mar 29, 2023 8:19 pm
Kal1981 wrote: Wed Mar 29, 2023 7:00 pm I used calculator.net and ran 2 different retirement age. One is at MRA collecting FERS+Supplement then SS at 62. The other is at age 67 collecting FERS+SS. It looks like retiring at 57 makes the most financial sense if I don’t live past 95, and most actuarial tests I’ve taken indicate I have 74% to live to age 84 and 50% to 92. Does this forecast look about right? Or did I miss something? Image
What you are looking at assumes that you work longer. If you retire at 57 and stop working, you get five years of FERS supplement whether you claim SS at 62, 67, or 70, so the FERS supplement is irrelevant to the calculation. If you keep working until 62 in a non-government job, you lose the FERS supplement, although you likely get more money to invest, and you will probably increase your SS benefit by replacing low-earning years early in your career by high-earning years.
Yes, once I retire from the feds, I don’t plan to work anymore.
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