Professor Learns About Retirement Timing

Dear Retirement Adviser,

I teach college, typically making about $100,000 a year including summer school pay. I will turn 66 years old in September 2014 and will keep working as long as I can. Should I get Social Security starting my birthday month and have my Social Security benefits reduced because I expect to make about $48,150 from my work between January and August? I'm assuming that I won’t teach summer school, meaning I would not have outside income during those months.

My expected benefit at full retirement age is estimated at $2,081.


-Jim Juncture

Dear Jim,

If you start receiving benefits eight months before your full retirement age of 66, your benefits will be nearly 96% of your primary insurance amount. From your estimate of $2,081, that means your monthly benefit will be $1,988.60.

You might look at this thinking a difference of $92.40 per month versus eight months of benefits worth $15,908.80 suggests filing early. Because you're still working and receiving retirement benefits before your full retirement age, these benefits will be reduced by about $2,250, according to my estimate. That means you'd receive $13,658.80 in net Social Security benefits in the eight months prior to your full retirement age.

The Social Security Administration rule is this: In the year you reach full retirement age, it deducts $1 in benefits for every $3 you earn above a pre-established limit. In 2014, this limit is $41,400 a year or $3,340 a month. But, it only counts the earnings before the month you reach your full retirement age. Pensions, annuities, investment income, interest, veterans or other government or military retirement benefits are not counted in this calculation. Bonuses, commissions and vacation pay are considered when calculating reduced benefits.

Your estimated earnings of $48,150 for the eight months prior to your September birthday means that you will see your Social Security benefits temporarily reduced. After you reach full retirement age, Social Security will recalculate your benefit amount to leave out the months when it reduced or withheld benefits due to any excess earnings.

I don't understand the rush to file for benefits if you plan to continue to work for a few more years. You can budget for deciding not to teach this summer.

If you're married and healthy, I'd suggest that you avoid filing for benefits before age 70 so you can earn delayed retirement credits. You can choose to file and suspend benefits at your full retirement age so your spouse can receive a benefit while you wait to claim benefits.

If you're unmarried or unhealthy, then you may not want to wait until age 70 to claim benefits. I'd still suggest waiting before filing for retirement benefits. William Meyer of Social Security Solutions suggests that singles should avoid claiming Social Security retirement benefits between age 65 and 5 months, and 66 and 7 months. If you aren't convinced, then consider getting professional advice on the best time for you to file for Social Security retirement benefits.

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