Why claiming Social Security early could be more popular than ever this decade

[SmithOp]

If your income is more than 400% of Federal Poverty Level - FPL you have to pay back the subsidy, its added to your tax bill but not a tax per se. It's all calculated on form 8962.

If you sign up for ACA be very careful telling them what your income will be, too low and you repay part of the premium tax credit PTC.

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[Brett]

If your income is more than 400% of Federal Poverty Level - FPL you have to pay back the subsidy, its added to your tax bill but not a tax per se. It's all calculated on form 8962.

If you sign up for ACA be very careful telling them what your income will be, too low and you repay part of the premium tax credit PTC.

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correct, if your income is higher then a % of the ACA premium is added back to taxes, not "taxed"

 

[zinger1457]

That gets to be a tough one, because, remember, if one is eligible for ACA subsidy, it is counted as income. So the choice is between taking actual income or getting taxed on "income" never received. Obviously, money in an account is spendable on anything, while subsidy creates income that is earmarked as healthcare spending.

Personally, I would not be trying to stay below a certain income level only to be taxed as if you received more. I would find it more stressful to avoid actual income, but that's just me. If a person is happy living on the subsidy level, rock on, but best to get ducks in a row and not have expenses that are going to blow that plan.

The ACA subsidy is not counted as income, it's treated as a tax credit, the difference with other tax credits is you're allowed (but not required) to take the credit during the year and have it sent to your insurance company if your estimated income qualifies. If you collect a subsidy throughout the year and at the end of the year your actual income exceeds the ACA MAGI limit or it exceeds what you estimated at the beginning of the year then you have to pay back all or part of the subsidy. If your actual income is lower at the end of the year then you receive an addition tax credit deduction.

 

[geekette]

If your actual income is lower at the end of the year then you receive an addition tax credit deduction.

I like this part for those who lost their job during the year or are gig workers, etc.

 

[WinniWoman]

That gets to be a tough one, because, remember, if one is eligible for ACA subsidy, it is counted as income. So the choice is between taking actual income or getting taxed on "income" never received. Obviously, money in an account is spendable on anything, while subsidy creates income that is earmarked as healthcare spending.

Personally, I would not be trying to stay below a certain income level only to be taxed as if you received more. I would find it more stressful to avoid actual income, but that's just me. If a person is happy living on the subsidy level, rock on, but best to get ducks in a row and not have expenses that are going to blow that plan.

This sounds like me. I am stressing about this trying to stay below a certain income and how it will all play out. Ok- so yeah- we are right now living just on our savings account. I am not sure what the plan is after the first 6 months of this year, other than more of the same. But then the FA is talking small Roth conversions.

Then when I go on the website for the ACA insurer I can put in income anywhere from $30,000 to $40,000 to get a subsidy and also a cost sharing subsidy. At $45,000 only a subsidy- not a cost sharing subsidy. Right now I paid for 2 months of retiree medical insurance at $545 per month out of our HSA account. The ACA plans would be anywhere from $103-$228 per month for a Silver Plan.

Hubby's Part D plan premiums come out of the HSA account. We paid his Medicare Part B and Plan G premiums out of pocket on credit cards. He also has an HRA account his employer will fund with $60 per month and when I start Medicare will do the same for me as long as I have at least a Part D plan through their broker. We figure we would use that money to reimburse ourselves forr dental care, copays, out of pocket prescriptions or even to reimburse ourselves for a some of the Medicare Part B premiums if anything.

Can you believe you are not allowed to pay Medicare supplement premiums out of an HSA? I wonder what the rationalle for that stupid rule is? I mean- you can pay Medicare Advantage premiums and Part D and Part B from an HSA or HRA! And my husband's HRA allows Medicare supplement plans to be paid out of it I think. I don't get it.

But back to the ACA-I am not sure what to do. I mean- it is obvious there is a savings with the ACA plan. But I am not smart enough to understand the tax implications later on. The whole thing gives me a headache and is giving me grief when I just want to enjoy my life and deal with my move to our new house and community. I am so sick of dealing with it all it isn't even funny.

Bad enough we have to make a bunch of calls and do more work to change our current plans to the new state. Then to make another decision...ugh...

 

[VacationForever]

This sounds like me. I am stressing about this trying to stay below a certain income and how it will all play out. Ok- so yeah- we are right now living just on our savings account. I am not sure what the plan is after the first 6 months of this year, other than more of the same. But then the FA is talking small Roth conversions.

Then when I go on the website for the ACA insurer I can put in income anywhere from $30,000 to $40,000 to get a subsidy and also a cost sharing subsidy. At $45,000 only a subsidy- not a cost sharing subsidy. Right now I paid for 2 months of retiree medical insurance at $545 per month out of our HSA account. The ACA plans would be anywhere from $103-$228 per month for a Silver Plan.

Hubby's Part D plan premiums come out of the HSA account. We paid his Medicare Part B and Plan G premiums out of pocket on credit cards. He also has an HRA account his employer will fund with $60 per month and when I start Medicare will do the same for me as long as I have at least a Part D plan through their broker. We figure we would use that money to reimburse ourselves forr dental care, copays, out of pocket prescriptions or even to reimburse ourselves for a some of the Medicare Part B premiums if anything.

Can you believe you are not allowed to pay Medicare supplement premiums out of an HSA? I wonder what the rationalle for that stupid rule is? I mean- you can pay Medicare Advantage premiums and Part D and Part B from an HSA or HRA! And my husband's HRA allows Medicare supplement plans to be paid out of it I think. I don't get it.

But back to the ACA-I am not sure what to do. I mean- it is obvious there is a savings with the ACA plan. But I am not smart enough to understand the tax implications later on. The whole thing gives me a headache and is giving me grief when I just want to enjoy my life and deal with my move to our new house and community. I am so sick of dealing with it all it isn't even funny.

Bad enough we have to make a bunch of calls and do more work to change our current plans to the new state. Then to make another decision...ugh...

One loophole in the ACA system is that if you submit estimated income as in the lowest bracket and get full subsidy and cost sharing, and you end up with higher income, you only need to pay back some or all of the premium subsidy but not the cost sharing subsidy. You actually can come out way ahead.

 

[klpca]

Interesting thread. My family (maternal) lives forever - my grandparents were 97 and 98 when they passed. Everyone else is still alive - all going strong in their late 70's and 80's. On my paternal side, most live well into their late 80's. So my worry is about outliving our assets (very low probability) and coupled with my thrifty nature I hesitate to take benefits early. I see the break even points, and the benefit payout differences - hundreds of thousands of dollars if I live in to my 90's - and I can't embrace taking the early payout. Luckily I have a few more years to think about it. I'm still on the fence.

 

[farinc]

What am I missing? If you take SSN at 62 vs 70, don't those 8 years of income more than offset the higher monthly payment if you wait until 70 even if you live into your 80s?

 

[Brett]

What am I missing? If you take SSN at 62 vs 70, don't those 8 years of income more than offset the higher monthly payment if you wait until 70 even if you live into your 80s?

not necessarily
https://www.aarp.org/retirement/planning-for-retirement/info-2018/social-security-suze-orman.html

 

[Ralph Sir Edward]

This is a <very> complex issue. There is no right answer.

As to SS proper there are curves calcualted that show the breakeven is in the early 80s. If you live longer, you will get less total if you take early. The you have to figure your risk profile, and your other sources of income. Everybody is different.

And then there is the tax aspects. Very, very complex.

 

[Sugarcubesea]

Health insurance is the real issue. You will need to use the SS check to pay the health insurance premiums .

This is why I have to work to 65 or close to it, so that I don't spend all of my retirement money on insurance... I pay $65 a month to cover my whole family right now and next year it's only going up to $73 a month, I could not purchase insurance this cheap anywhere else... My company pays 95% of the employees premiums because they do no like turnover

 

[WinniWoman]

This is why I have to work to 65 or close to it, so that I don't spend all of my retirement money on insurance... I pay $65 a month to cover my whole family right now and next year it's only going up to $73 a month, I could not purchase insurance this cheap anywhere else... My company pays 95% of the employees premiums because they do no like turnover

Good employer!

I ended up switching to an ACA plan for me this year ( and for half of next until I am 65 in June). So happy I did. Silver Plan $40 per month. Very low copays if any and no deductible or referrals needed! Yes it’s an EPO but I can live with that for the short time on it. Everywhere around here accepts it. Heck it’s better than Medicare! COBRA PPO plan was costing me $547 per month and a high deductible. And what a bigger waste of money it would have been because when COVID hit you couldn’t even see a doctor here if you wanted to!

But you have to be low income, of course, for ACA. I will have to pull money out of my IRA before the end of the year to meet the minimum income requirements or else be thrust onto Medicaid.

My husband was thinking of getting a part time job at a hardware store next year but I told him to wait until 2022 until this whole health insurance thing is settled out. Don’t want to show any more income.

 

[pedro47]

I'm not sure one could say the federal government is "earning" interest from social security
But there is an "actuarial deficit" in the "trust fund" that will have to be dealt with at some point in the future

Guess who use surplus monies from the "Trust Fund?"

 

[PigsDad]

Guess who use surplus monies from the "Trust Fund?"

We would be crossing over into a political discussion if someone answers this. May I suggest we not?

Kurt

 

[VacationForever]

What am I missing? If you take SSN at 62 vs 70, don't those 8 years of income more than offset the higher monthly payment if you wait until 70 even if you live into your 80s?

You are not missing anything. Hence even on the SS website it talks about breakeven age. If I take mine at 62, my breakeven age is around 80. If I die before I reach breakeven age, I come out ahead. If I leave beyond, then I "lose". In my case, it is a no brainer, I will start at 62. Since my husband is quite a few years old than me, I am likely to switch to survivor benefits, i.e. his SS, before I turn 80. He waited until he turned 70 to start his SS so that it was at the max.

 

[Brett]

Guess who use surplus monies from the "Trust Fund?"

I'm guessing the federal government

 

[Icc5]

I know every situation is different. Both my wife and I worked for the same company which we had pension plans and insurance. After 43 years I got tired of problem solving for people that didn't care. I retired at 62 and started taking SS and went on my wife's health plan. She is a few years younger and we decided to see how it worked out for me. It has been great so she retired at 61 with 42 years in. We were able to get onto the retiree health plan that paid 75% compared to 80% when working. When I hit 65 I went on Medicare plus the retiree insurance. This year my wife hit 65 so both of us on Medicare and because of that our retiree insurance drops down to $50 a month for each of us because Medicare now pays first before retail clerks retiree plan.
My wife will wait 5 more years before going on SS. We saved and planned all our life's and between investments,401k's, Roth's and other income we are better off then ever. We also have always planned to help our kids and are able to give them $15,000 each a year to help. So far they like us have been able to stay living in California. I realize how much luck had to do with our circumstances. Over all our years at work our pay was below others in Silicon Valley but we always had the good benefits and we're building up our pensions.
We also bought houses when we were 26 and 21 and saw the values grow so when we married we were able to really move up and live in a great area. Our kids would never be able to afford houses here except in our planning they will inherit this house and enough funds that they too should be able to end up here. Because of planning we haven't ever missed out on anything,have owned in 4 timeshare companies for about 30 years and us and our kids have been able to see much of the world and now our Granddaughter gets to see even more with us.
Bart

 

[pedro47]

COVID-19 IMHO, is causing many folks to take Social Security benefits at 62 because they are afraid that this pandemics is going to be worst in 2021,

 

[kckaren21]

eta.... actually, I think my issue is that my income went above subsidy level and may have triggered a penalty. It's not clear if it was the subsidy or cost sharing, but it was definitely the health insurance issue that nailed me unexpectedly.

This happened to my friend, too. She made more money than expected, and that made her ineligible for the ACA subsidy she had gotten all year. She ended up owing $8,000 on her tax return, paying back the subsidy. Beware!

 

[SmithOp]

This happened to my friend, too. She made more money than expected, and that made her ineligible for the ACA subsidy she had gotten all year. She ended up owing $8,000 on her tax return, paying back the subsidy. Beware!

Correct, the cutoff is 400% of Federal Poverty Level FPL, if you hit 401%, pay it all back.



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[VacationForever]

Correct, the cutoff is 400% of Federal Poverty Level FPL, if you hit 401%, pay it all back.



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You don't need to repay share of cost subsidy given for silver plans, only need to repay the premium.

 

[geekette]

COVID-19 IMHO, is causing many folks to take Social Security benefits at 62 because they are afraid that this pandemics is going to be worst in 2021,

For some, their job went away and is not coming back. Probably for others, health issues they already have make them wary of getting out there. I would expect a smattering of those that were ready to retire and pandemic just pushed the date up.

 

[Talent312]

If I had worked past 62 to raise my SS income, there'd be two issues:
1. Eight years of missed SS payments, which I'm not sure I'd last long enuff to cover.
2. If I did pass the breakeven point (80), I doubt the extra $$ would matter much.

Wait, there's one more. So, make that three issues:
1. Eight years of missed SS payments. 2. Not needing the the extra $$, and...
C. I'd have to keep working... which I did not want to do.
.

 

[uaremymuse]

If I had worked past 62 to raise my SS income, there'd be two issues:
1. Eight years of missed SS payments, which I'm not sure I'd last long enuff to cover.
2. If I did pass the breakeven point (80), I doubt the extra $$ would matter much.

Wait, there's one more. So, make that three issues:
1. Eight years of missed SS payments. 2. Not needing the the extra $$, and...
C. I'd have to keep working... which I did not want to do.
.

Even though I don't need SSN, number 3, I came to the same conclusion on items 1 and 2. I guess the decision is made more complicated when people wish to include the tax implications of the additional income tax that it may create if they have other income sources at the same time that they begin taking their SSN.


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[VacationForever]

If I had worked past 62 to raise my SS income, there'd be two issues:
1. Eight years of missed SS payments, which I'm not sure I'd last long enuff to cover.
2. If I did pass the breakeven point (80), I doubt the extra $$ would matter much.

Wait, there's one more. So, make that three issues:
1. Eight years of missed SS payments. 2. Not needing the the extra $$, and...
C. I'd have to keep working... which I did not want to do.
.

I only have 18 years of SS contribution, 17 years of 0s - I was working 15 of those years, just not in the US. Like you, I am not going back to work. My contributions were still high enough that my PIA is more than half my husband's PIA so I will claim at 62 against my own SS contribution.