Taxable Social Security Income

[rsandy]

A married client turned 66 on Dec 15, 2008, her full retirement age for ss benefits.
She received $ 56,000.00 in W-2 earnings for 2008. How are her benefits affected as she earned over $ 36,120.00 in the first year of her retirement? Am I correct in believing that she would lose $ 1.00 for every $3.00 earned over the $ 36,120.00 threshold based upon only the one monthly payment due for December/08 but perhaps not received until 2009. And, further that none of her subsequent 2009 ss benefit would be reduced after allowing for the 2008 adjustment. For instance, assume her Dec/08 benefit was $ 1,000.00, Social Security would make an adjustment, after receipt of her 2008 return, of $ 333.00.

[taxmom34]

since taxpayer retired in december and worked all year. social security makes an adjustment for the first year of retirement, in other words for 2008 there will be no repayment. you are allowed to make as much money as you can BEFORE you retire. i hope i explained this correctly.

[rsandy]

Thanks so much. I believe what you explained means the threshold amount of
$ 36,120.00 applies only to the month of Dec/08 and as she obviously didn't earn all her
$ 56,000.00 in the month of December no adjustment will be required.

Again, thanks for your comment.

****

[FEDUKE404]

Pro-rate for one year only

I don't have the specifics on hand (certain it is on the Soc Sec website, even with a worksheet for pro-rating everything?) but in theory a person who reaches full retirement age but was previously receiving SS would have to figure out how much wage income was actually earned before and after the magic date.

It is a one-time calculation. For full years after FRA, no reduction in benefits. For full years before FRA, the "usual" reductions/payback of benefits.

Of course, the taxable amounts of the benefits remain the same barring any lump sum and/or payback issues.

FE

[FEDUKE404]

Soc Sec benefits in year of full retirement age

From SSA website - this should answer everything!!

FE


We use a formula to determine how much your benefit must be reduced:

If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit.

For 2009, that limit is $14,160.

In the year you reach full retirement age, we deduct $1 in benefits for every $3 you earn above a different limit, but we only count earnings before the month you reach your full retirement age.

If you will reach full retirement age in 2009, the limit on your earnings for the months before full retirement age is $37,680.
(If you were born in 1943, your full retirement age is 66 years.)

Starting with the month you reach full retirement age, you can get your benefits with no limit on your earnings.