Social Security Income - Tax Question (While Still Working)

[bdoubleu]

I'm asking this on behalf of my mom.  She is 62, will be 63 this year.  She has always seemed like a person who wanted to work until she couldn't anymore, which seemed reasonable to me since her job is fairly low stress, close to home, and she has been there for ~30 years now (wow!).  She recently expressed interest in either fully retiring or at least cutting back her hours in the next 3-7 years (yay!).  I've been working with her to slowly cut spending and increase savings (very resistant to big changes, but getting more malleable, so we go at her pace).  We've actually made a ton of progress over the last couple years

Not sure if any of this is useful information, but:

Single
She currently makes ~$46,000/year gross.
2014 Taxable Income = $36,000
No state income tax
Trad 401(k) balance = $94,000 (currently working at this company)
Contributes 11% gross income = ~$5000/year (+ 4% employer match) to traditional 401(k)
Trad IRA = $11,000
Roth IRA = $18,000
Cash (money market) = $33,000 (yes, working on getting more of this invested)
Home equity = $120,000
No debt
Net worth (including home equity) = $295,000

Take-home pay (less 11% to 401(k), health/dental, taxes) = $1370/check (biweekly)
Monthly expenses = $1400-$1600/month

Big outflows of money in 2014 - she paid off her car ($16,000) and house ($15,000) balances.  Most of that should be easily redirected toward savings this year.  My (our?) goal for the year for her is to drastically increase 401(k) and/or IRA contributions (401k has great expense ratios [0.04, 0.03 for her current investments] and Vanguard funds available).  Both Trad and Roth IRAs transferred to Vanguard last year.

My biggest question is: if she were to take Social Security now, she would get $1,300/month; at 66, $1660; and 70, $2200. 
1) If she took it now, could she put the equivalent amount of money ($15,600) in her traditional 401(k) and/or trad IRA and avoid taxes on that (for now)?
2) Do you forsee any tax issues (ie bumping to higher bracket) once she hits RMD age?  I'm assuming she would be done working by then, but possibly working part-time.
3) Other (better?) options for her to stop working?  Expenses are a work in progress.

Feel free to ask other questions, and I can also provide more information if needed.
Thanks!!

Edited to add:
She has been married twice, divorced both times (last time in 1994)
She is in good health, aside from breast cancer (6 years remission), and high blood pressure (controlled with lifestyle/medications). She stays active on a regular basis. One of those people that everyone thinks is at least 10 years younger than she is.  Her dad is still alive at 96 years old, her mom passed after a bad fall when she was maybe 85?  All siblings are alive and healthy, she is the middle of 7.

[Earthling]

You are a kind son for helping in this way.

Can you provide two more pieces of information?

(1) Is/was she married, and/or is she a widow?
(2) Is she in good health?

The former bears on potential spousal benefits and the latter bears on the higher lifetime annuity benefit of deferring until she is 70.

[bdoubleu]

You are a kind son for helping in this way.

Can you provide two more pieces of information?

(1) Is/was she married, and/or is she a widow?
(2) Is she in good health?

The former bears on potential spousal benefits and the latter bears on the higher lifetime annuity benefit of deferring until she is 70.

Edited OP, see above.

[LadyStache]

She might be eligible for spousal benefits if she had been married for at least 10 years (even though she is now divorced).

[Retired To Win]

... My biggest question is: if she were to take Social Security now, she would get $1,300/month; at 66, $1660; and 70, $2200. 
1) If she took it now, could she put the equivalent amount of money ($15,600) in her traditional 401(k) and/or trad IRA and avoid taxes on that (for now)?

I am pretty sure the answer is NO.  Contributions to tax-deferred accounts must come from current earned income, i.e. her salary.  Her Social Security payout will be taxed.  How much of it gets taxed will depend on certain individual factors.  Prior to full retirement age, you must also make sure you understand that some part of her SS payout may get forfeited, depending on her earned income for the year.

To make sure she doesn't get a nasty surprise (and to confirm on your own what I am telling you I think I know), better get yourself over to irs.gov and check things out.

Good luck to you and your Mom.

[Capsu78]

With age genes like that, I would work toward deferring as long as possible. 
Also, I make a lot of assumptions based on the fine advice I get off these forums, but when I hit 62, I will consider getting a professional second opinion on when and how to take my SS.  You would not be "unmustachian" to find a fee only retirement planner familiar with pre retirement planning- not the SS as there answers can be inconsistent and nobody trying to sell you products.

[mxt0133]

For 2015 you can only earn up to $15,720/yr without your benefits getting affected if you collect SS early.  Over that amount and "one dollar in benefits will be withheld for every $2 in earnings above the limit."

So if you are collecting $12000/yr in early SS benefits and you earn $12000 over the earning limit, then your benefits will be reduced by $6000 and you will only collect $6000.

Ref: http://www.ssa.gov/retire2/whileworking.htm

What I would consider in your mom's scenario is running out of money, she doesn't seem to have enough assets to secure her retirement.

With only 160K in liquid assets there is a real possibility that she will outlive her assets.  Because of that I would deffer collecting for as long as possible.  I would not be concerned with collecting as much SS benefits by collecting early.  I would be concerned about being able to solely live on her SS benefits.

It's possible for her to file and suspend her benefits and collect based on spousal benefits once she reaches full retirement age, it kind of the best of both worlds.  And when she reaches 70 1/2 she can then switch to her own benefits.

[southern granny]

I think she will be fine.  Since she isn't wanting to retire right now, she can probably work until she is full retirement age 66.  At full retirement age she can draw her full social security and no penalty for working wages. Then with social security, medicare coverage, and part time work she should have more than enough.   Also wondered if maybe she had a room in her house and would be willing to take in a boarder.  Tax deferring money after retirement doesn't seem too important since she won't be that far from RMD.   She is lucky to have you looking out for her.

[bdoubleu]

Thanks everyone! I've read so much and familiarized myself about how to handle cash flow and investments for FIRE, that "normal" retirement processes were making my head spin. Such a wonderful community with a variety of suggestions and ideas.

Each of the two marriages was for 2-3 years at most. I think she figured out she can handle things just fine on her own, so I don't see another marriage in her future.

My biggest worry is also that she will outlive her assets. Although, we have no problem providing some financial support to her if needed, since I don't foresee her jumping off the financial deep end based on her history. We are on pace to be FI in about 4-5 years ourselves, and I wouldn't mind delaying that a year or two if she needed some support - hubs is already FIREd and prepping to enter SAHD status later this year :)

(I am an only child, whom she raised essentially as a single mom, and I only recently pieced together how difficult it must have been to raise a kid by herself, no family nearby, on a high school education, and without a single entrepreneurial bone in her body. I could sacrifice a few years of my adult life if need be.)

I think she will be more than okay with working full time until full retirement age (as its really only 3-4 years more). That SS benefit should more than cover her expenses, as, like I said earlier, we are still working on trimming her expenses and increasing her investments.

Thanks again!

[chuckaluck]

Based on your description, your mom is in good financial shape.  Her housing costs are minimal and, in a bit more than 2 years, she'll be eligible for medicare. The most ideal situation would seem to be for her to cut back work hours in a couple/few years, while collecting SS.  I too worked at the same place for about 33 years and was all set financially to fully leave.  But I was asked to stay on part time (~20 hours per week) to teach and help out the younger folks (I am now in my 3rd year).  BEST thing that ever happened to me.  My stress level is negligible, I LOVE helping out, and my sense of worth is extremely high.  And I have much time outside of work to do whatever I want to do (things that I had put off for years). Though I always liked my job, I now love it and look forward to going in. Given your mom's good health and longevity genes, working part time after a couple/few years seems like the best idea.  And having you around is "icing on the cake".  She must be very proud of you.  Please keep us updated on what you decide.  Take care.