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  1. #1
    Join Date
    Oct 2006
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    Default Re: Types of Income Included in Early Retirement Income Limits

    Quote Quoting adjusterjack
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    There are two issues involved in that question: Reduction of SS retirement benefits and taxability of SS retirement benefits.

    For you, at age 69 (actually since age 66 I think) there is no reduction in retirement benefits regardless of how much you earn from any source.
    Her husband is 69, she is 63 so yes she would be limited in how much that she can personally earn.

    However, you could pay taxes on your SS retirement benefits if your earnings from any sources exceed a certain amount. According to the 2015 handbook you'll pay taxes on your benefits if you and your spouse have a total income from all sources that is more than $32,000.
    Slightly wrong. The calculation is that 1/2 of your social security benefits plus all of the rest of your other income must be under 32,000 or SS benefits start to become partially taxable, and above 44,000 before they max out at 85% taxable. Its 25k and 33k if you are single.

    As for your wife, if she wants to start collecting retirement benefits early and keep on working her benefits could be reduced depending on the amount of her income from employment and also be taxable.
    I think its the wife posting...but I could be wrong. However, her earnings have to be less than about 15k annually or her benefits reduce 1 dollar for every two dollars above approx. 15k. Its likely her benefits would be at least partially taxable but its not guaranteed without doing the overall calculation.

    You can learn all about that stuff by reading the SS benefit guide at:

    https://www.ssa.gov/pubs/EN-05-10077.pdf
    That is an excellent resource if read thoroughly.

  2. #2
    Join Date
    Mar 2013
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    18,340

    Default Re: Types of Income Included in Early Retirement Income Limits

    Quote Quoting llworking
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    I think its the wife posting...but I could be wrong.
    You had me scratching my head there for a minute but I looked back at the discussion and there are a couple of indications that it's the husband posting:

    "Now I am able to get Medicare, so just have a supplemental at a couple hundred a month. She pays 1100/mo for insurance."

    Quote Quoting llworking
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    However, her earnings have to be less than about 15k annually or her benefits reduce 1 dollar for every two dollars above approx. 15k. Its likely her benefits would be at least partially taxable but its not guaranteed without doing the overall calculation.
    OTOH, it does appear that the question involves her taking early benefits at age 63 so the reduction in her benefits due to her earnings would apply.

    To repeat the distinction. The reduction of benefits involves earnings from employment (or self employment) and the taxability of benefits involves income from all sources.

  3. #3
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    Oct 2006
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    Default Re: Types of Income Included in Early Retirement Income Limits

    Quote Quoting adjusterjack
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    You had me scratching my head there for a minute but I looked back at the discussion and there are a couple of indications that it's the husband posting:

    "Now I am able to get Medicare, so just have a supplemental at a couple hundred a month. She pays 1100/mo for insurance."



    OTOH, it does appear that the question involves her taking early benefits at age 63 so the reduction in her benefits due to her earnings would apply.
    Only if her earnings exceed the limits.

    To repeat the distinction. The reduction of benefits involves earnings from employment (or self employment) and the taxability of benefits involves income from all sources.
    That is a good way to put it. I will also add that if earnings are going to significantly exceed the limits then its a bad idea to take early SS benefits. That locks one into the lower rate for the long haul, and there is no point in doing that if the benefits are going to be significantly reduced by employment.

    I am getting the impression that the OP is exploring his wife collecting early retirement to help bring in more income to help cover the cost of her insurance. She has less than two years until she qualifies for medicare. Perhaps a better analysis to make is how healthy is she? Has she had a full physical lately? If she is very healthy then maybe a high deductible policy with an HSA would be better than what she has now? Or perhaps a Bronze level policy on the Obamacare exchange? Some very healthy people might even gamble with no insurance for the under two years she has left until she qualifies for medicare. Yes, there is a tax penalty for not having insurance but for people in that age bracket there are not many who wouldn't qualify for the affordability exemption based on the cost of insurance when you are in your sixties.

    Some unhealthy people have even chosen to divorce and then "live in sin" so that one of them qualifies for subsidies on the Obamacare exchange.

    The point I am making is that a cost analysis needs to be done...and decisions made based on that cost analysis. So many people pay for high cost insurance that do not really need it...there are less expensive alternatives. Yes, those alternatives come with a risk if something disastrous happens, but that is where someone's actual health comes into play.

  4. #4
    Join Date
    May 2015
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    13

    Default Re: Types of Income Included in Early Retirement Income Limits

    Yes, the issue is whether the wife could/should go for early bennies. She is not in good health, FTR.

    Wild horses could not drag her to Obama's exchange, period. We have a farm worth maybe a million and a half (bought with blood, sweat and tears, not inherited), which cost us far, far less than we have paid in medical insurance over the years. The thing was: if one became ill, there was a chance it couldn't be purchased. That's the way it used to be, when it really was insurance, lol.

    Thanks to all.

  5. #5
    Join Date
    Oct 2006
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    16,474

    Default Re: Types of Income Included in Early Retirement Income Limits

    Quote Quoting fair
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    Yes, the issue is whether the wife could/should go for early bennies. She is not in good health, FTR.

    Wild horses could not drag her to Obama's exchange, period. We have a farm worth maybe a million and a half (bought with blood, sweat and tears, not inherited), which cost us far, far less than we have paid in medical insurance over the years. The thing was: if one became ill, there was a chance it couldn't be purchased. That's the way it used to be, when it really was insurance, lol.

    Thanks to all.
    With an asset like that you are going to want the wife to be insured. The 25k or so that she will pay in insurance until she hits 65 and qualifies for medicare will be worth it. However, you still need to do a real cost analysis of whether locking her into the early rate, based on what she might be earning, is really worth it in the long haul.

    Sadly, one has to look into real life expectancy/quality of life decision when making decisions about SS retirement benefits.

    For example, a person who is healthy enough that they could easily work to age 70 or beyond and therefore collect max benefits and that will be their only income beyond age 70, might be better off delaying SS benefits until they are 70, even if they die only a few years later, because those higher benefits improved their quality of life for the years after age 70.

    However others might have very different situations where the extra income from age 62 might improve the quality of life that they have left.

    And there are others who mess up and take early retirement and live to 80 or 90 plus and live in poverty because they chose to retire early.

  6. #6
    Join Date
    May 2015
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    13

    Default Re: Types of Income Included in Early Retirement Income Limits

    Quote Quoting llworking
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    With an asset like that you are going to want the wife to be insured.
    We never went 5 minutes without medical insurance, and never would, even though it was after FICA cost for self employed, so a tremendous burden. Too risky for our blood. When Obamacare shut down the state's high risk pool, which she bought when I went on Medicare, the wife nearly had a heart attack finding another individual plan. She chose Assurant through a private broker. Two years later it stopped issuing on account of Obamacare mandates, so round again. It has been a nightmare, but folly to stop now with three years to go and forty some under out belt.

  7. #7
    Join Date
    May 2015
    Posts
    13

    Default Re: Types of Income Included in Early Retirement Income Limits

    The only question I was pondering was just what income was involved in calculating the ~ 15000 ceiling. I now gather it is only the wife's income that is subject to FICA taxation, whereas I previously thought it would be ALL household income, since I always viewed early retirement benefits to be essentially welfare with lipstick, so disbursed as a matter of household need. So, thanks for that heads up.

    We file complicated taxes every year (although a joke after seeing the picture of The Donald with his three or four foot stack,) understand that some SS is taxable income, and have no issues there.

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