Q: I will file for Social Security in August when I turn 66, but I intend to keep on working. I will earn $100,000 for the 2010 tax year. Am I right that from August on, I can receive my full benefit? Or does the Social Security earnings cap apply on an annual basis, which would mean I forfeit some or all of my 2010 benefits? --SM via email
A: As of the month in which you turn 66, you can earn any amount, while collecting Social Security, without forfeiting any of your benefit. If you apply for Social Security in August, you'll get your first unreduced check in September.
When you apply for your benefit, also ask the Social Security Administration to look back at the six months prior to your application to see if you're entitled to a discounted benefit for that six month period. It will depend on how much you earned during that time.
In the year that you turn 66, you forfeit $1 of benefits for each $3 you earned above $37,680 prior to your birthday, says Jane Zanca, a Social Security Administration spokeswoman in New York.
Let's say that you earned $67,680 in 2010 before your birthday, for example. That's $30,000 above the annual $37,68 cap. You'd forfeit $10,000 of your benefits during those six months -- $1 for each $3 above the cap. But if your benefit is $2,000 a month (or $12,000 for the six month period before August), you'd still be entitled to keep $2,000 of it.
One less welcome bit of news: As long as you continue working, you will have to pay Social Security and Medicare (otherwise known as FICA) taxes. The FICA tax applies to the first $106,800 that you earn in 2010, whether or not you're collecting Social Security.
This only seems unfair to people who mistakenly think of Social Security taxes as 'contributions' to their own retirement accounts -- a warm and fuzzy notion that unfortunately just isn't accurate. Look at it this way: There's no exemption from taxes that support the public school system -- even for people who have no kids, or have kids in private school, or have kids who've long since graduated from school. And there's no exemption from Social Security taxes, even for people who are already collecting a benefit; those taxes apply to everyone who works.
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(c:) Lynn Brenner, All Rights Reserve
Can you tell me how to find info at the SS web site (I can't find any) on receiving benefits for the previous months before my 66 birthday in Sept. 2010. I don't just want to ask the SS people about this possibility when I file for retirement in Sept and be told SORRY.
Thanks John
Posted by: John Mcdonald | 06/08/2010 at 11:08 AM
Lynn replies: It's in Section 1513.1 of the Social Security Handbook, titled "Retroactive Effect of Application."
Here's the link:
http://www.ssa.gov/OP_Home/handbook/handbook.15/handbook-1513.html
Posted by: lynn brenner | 06/08/2010 at 02:55 PM