I’m amazed at how little I knew about Social Security before I applied for retirement benefits earlier this week. For example, I knew that there were limits on how much earned income you could receive while drawing your full SS benefit if you retire before your “full retirement” age – in my case, 66. What I didn’t know is that once you reach full retirement age, they give you back all the money they docked you during that time. I had pretty much decided already to file, but that knowledge tipped me over the edge.
Just to recap, and for those who don’t know: I decided in May to suspend my freelance business until I could concentrate on my clients instead of other pressing issues. My business account had enough cash to sustain adequate pay-outs for a few months, but by early July I was ready to look ahead. What if I didn’t want to return to work, or didn’t find new clients whose projects interest me? My BNA pension pays for my share of the necessities, but my business profit has allowed me to have things and go places I want without worrying about the costs.
Our financial adviser, Nick Hodges, suggested in May that I do two things:
· figure out how much we really spend now and want to spend over the next few years, and
· find out how much my SS benefit would be right now versus waiting until October 2013.
Of course no one who isn’t meticulous about budgeting and tracking expenses (I am not) wants to take on the first task Nick set before us, so I started with a call to the Social Security Administration. Wait, back that up – it was the approach of my 65th birthday and “aging in” to Medicare that made me call ...
I did not embrace this task happily, knowing how difficult government bureaucracies can be. However, before I can sign up for Medicare supplement insurance through BNA’s contract with ExtendHealth, I needed to know what my claim number would be and how my name would be stated on my Medicare card. So, I called last week ... and was amazed at how not-difficult it was. Not necessarily easy, but ...
First off, I tried to do it online. No go – I apparently answered some security question wrong, and I got locked out of their system for 24 hours. When I called, I was pleasantly surprised to find that I didn’t have to stay on hold while I waited for my turn. The SSA’s automated phone system said someone would call me back, and less than 10 minutes later someone did.
Before I could sign up for Medicare, the claims specialist told me what my SS benefit would be if I applied now. She pointed out that by accelerating my benefits payments by 15 months, I would gain more than $30,000. She said it would take me almost 15 years to make up the difference – a bit over-estimated, but close enough that I could see her point. My only remaining concern was how much I would lose if I work more than the earned income limit.
I thought I was doing well to know that if I earn more than a certain amount my benefits would be reduced. What I didn’t realize was that the amount by which they are reduced is actually withheld, not taken away. Once you reach full retirement age, they pay you extra every month until you’ve recouped all that was withheld.
Would I have started collecting Social Security benefits earlier had I understood that the reduction was being withheld, not taken away? Perhaps – if I had also had known I was past the threshold point-of-no-return, which is how I’ve come to think of the balance between the amount I gain by collecting before age 66 and the amount by which my benefits are lower because I signed up early.
Oh well, what’s done is done ... I have no regrets for working until now. I do believe, though, that I’m ready to be retired.
We’ll see how long that lasts!