Author Topic: Help me think about dad's social security?  (Read 1190 times)

mozar

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Help me think about dad's social security?
« on: February 15, 2021, 08:31:00 PM »
My dad is 63 (birthday in August) Gross annual salary is $67,500
He will get $2100 mo. from ss at 64
He will get $2500 mo. from ss at 66 1/2

He will get an additional $1000 (50% of benefits) because he has a minor child who is 10.
He will also get $1500 mo. from a pension starting at 65
AND if he retires from his job at 65 but does NOT take social security his job will give him a pre social security benefit of 500 a month.

I've convinced him to take social security no later than 65 because if he keeps waiting he's losing the 10 year old benefits.

Now he wants to know if it makes sense to take social security at 64 and keep working until 65.
He knows the tax penalties are 50%.

But! If I understand correctly he will get the tax penalties back at 66 1/2. He is curious about this, he sees it like a savings plan. Start taking social security at 64, not see any of it and then get a huge windfall at 66 1/2.

I am understanding all this correctly? I told him this is overly complicated. He says he's going to talk to a tax lawyer about it.

SimpleCycle

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Re: Help me think about dad's social security?
« Reply #1 on: February 16, 2021, 11:23:51 AM »
I think we need a little more information.  Is your father divorced or widowed?  Is the child receiving survivor benefits?

I think your dad has it wrong though - at 66 1/2 the earnings penalty no longer applies, but you don't get the previous clawed back benefits paid out.

Here's a good article about this situation: https://www.kitces.com/blog/why-social-security-dependent-benefits-for-a-child-can-make-it-a-good-deal-to-start-early-and-not-delay/


mozar

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Re: Help me think about dad's social security?
« Reply #2 on: February 16, 2021, 01:04:19 PM »
Right sorry. He is single filing head of household. No survivor benefits (knock on wood).

Thank you for the kitces article. He is so smart.

I read that you will get the benefits back, but over 15 years, which would probably break even with just waiting a year to file.
https://www.nolo.com/legal-encyclopedia/will-i-get-penalized-working-while-collecting-social-security-retirement.html

SimpleCycle

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Re: Help me think about dad's social security?
« Reply #3 on: February 16, 2021, 02:48:02 PM »
Social Security is so complicated - I didn't know they recalculated the benefit when you lose benefit due to the earnings maximum.

I probably wouldn't bother collecting benefits while he's still working, but I would collect them as soon as he retires rather than waiting until full retirement age.  You can make a spreadsheet of annual benefit amounts by year and then calculate the net present value of those benefits to compare them. 

https://obliviousinvestor.com/what-does-present-value-mean/


hdatontodo

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Re: Help me think about dad's social security?
« Reply #4 on: February 16, 2021, 03:47:17 PM »
>>  He will get an additional $1000 (50% of benefits) because he has a minor child who is 10

1> The benefits are for the MINOR CHILD, not the parent.

2> The amount is 50% of the Full Retirement Age amount, even if the parent files at 62, not the age 62 amount.




mozar

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Re: Help me think about dad's social security?
« Reply #5 on: February 16, 2021, 04:31:01 PM »
Quote
The amount is 50% of the Full Retirement Age amount, even if the parent files at 62, not the age 62 amount.

oh, wow.

Quote
You can make a spreadsheet of annual benefit amounts by year and then calculate the net present value of those benefits to compare them.

I'm not willing to do that for him and he's not going to do that.

Saving in Austin

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Re: Help me think about dad's social security?
« Reply #6 on: February 20, 2021, 09:24:08 AM »
You can try this website with the Social Security Calculator:

https://opensocialsecurity.com/

mozar

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Re: Help me think about dad's social security?
« Reply #7 on: February 20, 2021, 01:33:15 PM »
Quote
You can try this website with the Social Security Calculator:
thanks

 

Wow, a phone plan for fifteen bucks!