Social Security. Necessary to actually retire?

[Michael Weber]

I was reading my wife’s yearly SS statement and ran across this. At FULL RETIREMENT age a person can work and earn as much as wanted and there is NO reduction in benefits from SS. At least that’s the way I read it. My question is, is it actually necessary then to retire from one’s job in order to draw SS? At normal retirement age can you just apply for SS and start drawing it regardless if you actually retire from your job or not? I always assumed you had to actually retire from your job to draw SS or there was a limit on earned income after retirement. I do realize if you continue to work and defer drawing SS past your normal retirement date that your payments become larger because you waited but again assumed there was some kind of cap on earned income. This is all years off for me but I'm just curious. Anyone clarify this for me? Thanks.

[Don Carter]

I have not looked at this is few years but, I believe part or all of your SS income will be taxable. There is a limit on the amount of other income you can make, without causing your SS to be taxable.

That is just off the top of my head, so I would do a little more research.

[Cliff Rohrabacher]

you can work and draw down at the same time but there are limits on what you can earn.
The SS administration can give you more info
http://ssa-custhelp.ssa.gov/cgi-bin/...i=&p_topview=1

As an aside if you leave the country to live where it's cheaper you lost your SS after you are out for 60 days (I think it's 60) and you can't get it started again until you are back in country for 60 days.

My brother swears he knows lots of people who live as Ex Pats and are getting their SS checks. But the law as I understand it is that you can't.

[Mike Henderson]

I'm not an expert on Social Security so you should check my comments against advice from the SS.

You do not have to actually "retire" to draw social security benefits - you don't have to leave your job or do anything else. And above age 65, your earnings do not decrease your SS benefits. As Don pointed out, there's an earnings test to determine if your SS benefits will be taxable. I think it used to be $32K - if you made more than that, some of your benefits would be subject to income tax.

If you retire prior to age 65, your SS benefit will be decreased by some factor based on your other employment earnings - I think it used to be $1 for every $2 you earned. Note that this is only for labor earnings, not for investment earnings.

Finally, if you choose not to draw your SS at age 65 (or 62, or any other age) you will continue accruing benefit until age 70. That is, if you wait until you're 70 to draw your SS you will get more than a "full" benefit (the benefit you would get at 65 or whatever your full retirement age is).

Mike

[Tom Godley]

Years ago if you had a good paying job the penalties were such that it forced you to defer the SS until you stopped working or made less money. At 70 you were required to take the SS and the penalty did not apply - but you still paid the income tax on the SS.

The level that the penalty kicked in was extremely low.


My dad never retired so he paid SS tax from 65 to 70 but did not take any benefit plus he continued to pay into the SS system. He did receive an increase in his SS because of this when he was required to start to take it. After this the SS was included as income for taxes

What I can not remember is if you are required to pay into SS after you are required to begin taking benefits - because I believe the SS level caps at age 70.

[Michael Weber]

My naive assumption that 'retirement' meant retirement was incorrect. You can draw SS at normal retirement age with no earnings penalty but you will pay federal income tax on the SS as if it were ordinary income if your income is over 25000/yr (single) or 32000/yr (joint). Thanks to all that contributed.
Mike

[Dave Johnson29]

As an aside if you leave the country to live where it's cheaper you lost your SS after you are out for 60 days

Cliff, I am not sure that is correct as I know quite a few people who have retired to Asian countries and draw their SS just fine. In fact the SS payments are part of the Retirement Visa conditions for the Asian countries that do Retirement Visas.

Here's Malaysia for instance but lot of those countries do this...

http://www.mm2h.gov.my/

[Jim King]

When you live outside of the US you do not pay taxes on SS retirement benifits. I have just gone thru this . I live in Iquitos, Peru in the upper Amazon.

Also when working outside of the US and living oustide of the US for I think 11 months a year you do not pay income tax unless your personal earnigs are in excess of I think $80,000.

That is why we have so many foreign residents in places like this plus the cost of living is about 25% of what it is in the States.

[Dave Johnson29]

Also when working outside of the US and living oustide of the US for I think 11 months a year you do not pay income tax unless your personal earnigs are in excess of I think $80,000.

Jim, the Tax issue is another thing entirely. I am not sure about the 11 months and $80K, but it will depend on whether the IRS has a reciprocal agreement in place with the country you are living and earning money, including the SS as earned income.

The IRS calls the system Totalization and if you check their website there is a slew of stuff on it. There is also a non-resident Citizen's Tax rate which I think is a flat 10% on earnings in another country not in the Totalization scheme. Don't quote me on that one as I am not totally sure.

Best to find a good CPA who deals with international matters. I have considered retiring to Asia if current plans do not turn out as hoped.

[george wilson]

I began to draw SS at my full retirement age of 65 and 8 months. At full retirement age,you can make as much money as you want without the penalty of paying half of it back.

My journeyman Jon,retired at 62,and is saddled with those penalties. He will have to wait till he reaches full retirement age till he is free of it. I also pay income tax on my SS. I just wish they would leave retired people alone after they have contributed to society all their lives.