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This in and of itself, has nothing to do with the question asked, e.g., the adjustment to this 5/9 of 1% reduction factor that comes into play at FRA.
And it looks like you guessed wrong.
What you are describing is the reduction that takes place if you file early. The title of this thread, and what the OP is specifically asking about, is the upward adjustment of this reduction that takes place at FRA when one has lost some SS benefits due to exceeding the work income limit.
More difficult than you think because this isn't simply based on the 5/9 of 1% reduction taken for every month one is under FRA when they begin drawing Social Security. No, it is more complicated than that. It has to do with an adjustment of that reduction factor taken at FRA for those individuals who filed early, but then "lost" some of their benefits because they continued to work and exceeded the SSA limit.
As you may know, if you start drawing SS before FRA and still continue to work, SSA will withhold $1 for every $2 you earn over that year's limit. ($22,320 in 2024) But then at FRA, SSA will look back at the months where they withheld benefits and then recompute how much your SS benefit will be going forward. And this recomputation is accomplished by adjusting the reduction factor downward to eliminate those months in which you didn't receive a SS check due to having exceeded the work income limit.
So to expand upon your example, if the initial reduction was for 24 months (13.33%), but during that 2-year period the OP only received SS checks for 20 months due to having exceeded the work income limit, then his SS benefit would be recomputed at FRA and his reduction would be reduced to only 11.11% 20 months x 5/9%. IOW, he won't be penalized 5/9% going forward for any months in which he did not receive a Social Security check.
So, safe to say that there will be a small bump at FRA in SS Benefit, still below what would of been a normal benefit at 67 ?
the amount of SS at 65 will be a monthly benefit reduction of 13.33%......then at FRA (67), a recalculation at of monthly benefit will be at a 11.11% reduction moving forward ?..... basically a 2% monthly increase ?. I tried to ask SSA about this and they stated that "Once you apply at 65, your benefit will not recalculate, or increase due to continued work, your benefit at 65 is lifetime" ....... .....now I'm confused. MJ is pretty much on the right track, I will be losing two months of SS per year due to going over the earning limit.....so 20 months of actual SS over a 24 month period prior to FRA
quite simply what you are reduced for working is converted in to time back .
so as an example if one earned over the limit and filed at 62 and gave back a years worth of checks in total over the years , then at fra they are recalculated as if they had filed at 63 , gave back 18 months of checks , then recalculated as if it was 63-1/2 , etc ,etc
It is nice to see someone actually help the OP and give a PERTINENT answer to their question.
This in and of itself, has nothing to do with the question asked, e.g., the adjustment to this 5/9 of 1% reduction factor that comes into play at FRA.
And it looks like you guessed wrong.
What you are describing is the reduction that takes place if you file early. The title of this thread, and what the OP is specifically asking about, is the upward adjustment of this reduction that takes place at FRA when one has lost some SS benefits due to exceeding the work income limit.
More difficult than you think because this isn't simply based on the 5/9 of 1% reduction taken for every month one is under FRA when they begin drawing Social Security. No, it is more complicated than that. It has to do with an adjustment of that reduction factor taken at FRA for those individuals who filed early, but then "lost" some of their benefits because they continued to work and exceeded the SSA limit.
As you may know, if you start drawing SS before FRA and still continue to work, SSA will withhold $1 for every $2 you earn over that year's limit. ($22,320 in 2024) But then at FRA, SSA will look back at the months where they withheld benefits and then recompute how much your SS benefit will be going forward. And this recomputation is accomplished by adjusting the reduction factor downward to eliminate those months in which you didn't receive a SS check due to having exceeded the work income limit.
So to expand upon your example, if the initial reduction was for 24 months (13.33%), but during that 2-year period the OP only received SS checks for 20 months due to having exceeded the work income limit, then his SS benefit would be recomputed at FRA and his reduction would be reduced to only 11.11% 20 months x 5/9%. IOW, he won't be penalized 5/9% going forward for any months in which he did not receive a Social Security check.
Thank you so much for correcting and explaining this.
quite simply what you are reduced for working is converted in to time back .
so as an example if one earned over the limit and filed at 62 and gave back a years worth of checks in total over the years , then at fra they are recalculated as if they had filed at 63 , gave back 18 months of checks , then recalculated as if it was 63-1/2 , etc ,etc
You explained it quite well....but....
That's exactly what I'm talking about when I say it's too complicated for me.
Read that explanation three times, and it has fried my brain every time. Just a mental block, I guess.
Given that I don't plan to work and collect...I'm glad I'll never have to even think about figuring it out.
Kind of like spousal benefits... the topic comes up and -- being single -- it's instant tune out.
Can someone explain this in layman term. MY FRA is 67, currently working and likely apply for SS at 65 (1/2025), I will be over the earnings limit and will pay the penalty, how does the "Adjustment to the reduction factor" come into play.
There is one adjustment for applying early from 65 to 67. Assuming you at least wait for your birthday. In this case about 8% per year for the 2 years.
Another adjustment for going over the earnings limit. You may have to give back payments. At FRA this amount may be added to future benefit.
For your case need to ask Social Security how this applies to you.
If your work has 20 or more employees no reason to apply for Medicare at 65. You can wait until you retire at 67 or whenever. Most likely the program will stay the same but Part B will have higher premium.
There is one adjustment for applying early from 65 to 67. Assuming you at least wait for your birthday. In this case about 8% per year for the 2 years.
Another adjustment for going over the earnings limit. You may have to give back payments. At FRA this amount may be added to future benefit.
For your case need to ask Social Security how this applies to you.
.
This is why I posed the question here. I called SS Office, who stated, "Once you collect early at 65, it is lifetime regardless of continued work, going over earning limits and paying the penalty, there is no recalculation", and I've heard situations where SS agents are wrong in thier answers.
MJ's example hit the nail on the head, and is what I have heard from a few others, MJ put percentages into the response which helps immensely.
My husband went through this and not intentionally.
He retired at 62 and took ss at that age and kept working PT at the PS Postal Service.
He was just a sub so he only worked on weekends and vacation to deliver mail.
Well the full time Carrier quit out of the blue and he was the only one they had.
So he ended up working full time for over 3.5 years. He was collecting his SS benefits and then they were reduced and he had to pay back the overage. I think it was around 21 thousand. So when he could not SS just held back his monthly payment.
He actually paid the balance off before he got to Full retirement age.
His Social security was recalculated once he hit his FRA 66.4 months. By then he was back to just working PT. So SS dropped off his lower earning years and added the new higher paying years from the Post Office which benefited him.
He wants to be fully retired but no one wants to work at the Post office anymore- He only works twice a month now and vacation time.
This is why I posed the question here. I called SS Office, who stated, "Once you collect early at 65, it is lifetime regardless of continued work, going over earning limits and paying the penalty, there is no recalculation", and I've heard situations where SS agents are wrong in thier answers.
MJ's example hit the nail on the head, and is what I have heard from a few others, MJ put percentages into the response which helps immensely.
They are wrong.. Look at my answer... My husbands was recalculated at full retirement age ..
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.....now I'm confused. MJ is pretty much on the right track, I will be losing two months of SS per year due to going over the earning limit.....so 20 months of actual SS over a 24 month period prior to FRA
