Tom Mosley:

What if you turned on your social security and you had to pay it all back?

Hey, welcome to the Ease Into Retirement Show. I’m Tom Mosley, your host. Hey, what is your full retirement age and how do you determine your full retirement age and how can that make an impact on the money you get from Social Security? Well, that’s basically what we’re going to answer today. What your social security full retirement age is because once you know that, then you know what your options are and then you can determine what your numbers are as to how much you can get from Social Security so here we go.

Your full retirement age, see all of this gibberish? Let me just talk to you just a minute. All you’ve got to remember is your date. What year were you born? Were you born in 1954 or older than that? If you were born in 1954 or before that your full retirement age is 66, got it?

Now, if you were born in 1960 or this side of 1960, your full retirement age is 67. Say, well, wait a minute, I was born in the middle to the late fifties. Well, you’re tricky. All you had to do is remember your date. If you were born in ’55, your full retirement age is 66 years and two months. If you were born in ’56, 1956, your full retirement age is 66 years and four months. If you were born in 1957, it’s 66 years and six months. In 1958, it’s 66 years and eight months and if you were born in 1959, it’s 66 years and 10 months. That’s when you hit your full retirement age.

Again, if you were born in 1960 or this side of 1960, it’s 67. If you were born in 1954 or before, it’s 66. You say, why is that important? Because social security’s going to use your full retirement age to determine your benefits. Now let me just show you a slide.

When you go to apply for Social Security, now on this slide, 66 is the full retirement age. You might want to say… Hey, had a guy came in one time, his name was Ralph, and he said, my brother Bubba the plumber told me I’m turning 62 next month, I better go down there and turn on my social security because you never know how long them suckers are going to pay you social security. I said, okay. He told me who he worked for and he was one of my clients and I said, what do you do for him? He said, well, I drive the crane. He said, I lift up the steel from the ground, I lift it all the way to the top, and he said, I can drop that steel right in the 52nd floor right now. I’m working in downtown, we’re building a high rise.

I’m thinking that guy makes pretty good money. I said, how much money do you make? He said, about $125,000 a year. Hang on to that. His brother, Bubba, the plumber had told him, his brother Bubba the plumber had told him, you better go down there and turn it on because you never know how long those suckers are going to pay.

Well, maybe you feel like Ralph does and you want to turn your social security on at 62. Well, you’re going to take about a 25 to a 30% haircut if you’re age 67 for a full retirement age. You’re going to take a 20% haircut if you wait and if you wait a little while longer until you’re 64, and if you wait till you’re 65, bingo, you get to full retirement age and you’re going to get your full retirement benefit.

But if you wait past that then, your full retirement age, then you’re going to get an 8% bump for four straight years till you get 32% more at 70 than you would get if your full retirement age is 66. Waiting can make a difference.

Now, there’s some other things. Have you ever heard people say, I can’t make too much money because I’m on social security? Let me show you why. There’s an earnings test from the time you reached 62 until you reach your full retirement age. Now you know from previous in this episode, you know what your full retirement age is. From 62 until that point, you can only make, in 2022, these numbers adjust each year, $19,560 and then every $2 over that, you pay back a dollar of Social Security.

Well, what if Ralph had gone down like his brother Bubba the plumber told him to do and turned on his social security at age 62 and he’s making $125,000 a year? By the way, that’s more than $19,560 so he would over that year, pay every penny that he made from Social Security back.

Now there’s ways they kick a little bit back into you, but hey, don’t turn it on at a lower level if that’s what you’re going to get and you’re going to have to pay it all back anyway.

Just to confound things even more, in the year you reach your full retirement age, you can make $51,960. Otherwise, for every $3 over that, you pay back a dollar of Social Security. I was born in October. In my full retirement age up until September 30th, until the month before I reach my full retirement age, I can make $51,960 that year but every penny over that, every dollar over that, for every $3, I pay back one third of it back to Social Security. That’s one reason why some people say I can’t make too much money because I’m on social security.

Now, the good news is once you reach your full retirement age, that you’ve already learned what it is, then you can make anything you want, there’s no earnings limit.

Let me show you how this might work. Let’s take a lady named Susan Smith. Let’s say she was born in 1950 and she reached 62 in 2012 and one year later she quit and she went on her full retirement and she started drawing income at 62 from Social Security, but a year later she got a job. On this job her benefit was $16,800 from Social and she made $40,000 on this job. That’s more than $19,560. We take away the $19,560, she’s over $20,440. Half of that are $2 made, $1 back. She’s got to pay back $10,220. You take that away from her $16,800, she’s only going to get $6,580 from her Social Security because she’s over the earnings limit.

What your social security full retirement age is makes a big difference. It makes a huge difference in what you initially start drawing. Then if you go back to work, if you’re not working when you start drawing and you haven’t reached your full retirement age, it could make a big difference in what you have to pay back to Social Security. Make sure that before you do this, you’re getting good, solid advice and you consider your situation.

I’ve often said, in anything I present, I’ve often said that this is not tax legal, investment, or even gardening advice to you specifically. You need to get input for your particular situation from a financial advisor. You can call us if you don’t have one. From a financial advisor that will help you make the right decision for you because just like your social security number is different, your social security payment amount is going to be different and your full retirement age is going to be different. Every single thing, multiple things are different for you and you need to consider those things before turning on your social security. One of the biggest things is playing around with that full retirement age and making sure that you do it right.

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