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I am under full retirement age. I collect SS. However, I have the opportunity to take a six month contract job that will pay me appx. $34,000. This will be (give or take) $14,000 over the $19,000 (and change) limit. In other words, I will have to pay back to social security one dollar for every $2 I make from that $14,000 pot.
In other words, when all is said and done, I will owe Social Security $7,000. Presently, I earn just shy of $17,000 per year in SS benefits.
Is it worthwhile to take a job for $34,000 when I will be on the hook for $7,000 that I have to pay back to SSI?
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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That depends on how valuable your time is to you, how badly you need the extra money, and whether you have other things you could be doing. If that's full-time work for 6 months, after the additional tax you will be getting about $28/hour. That's still not bad for a retiree job. If you are working less than $40/week you will do better than that.
I am under full retirement age. I collect SS. However, I have the opportunity to take a six month contract job that will pay me appx. $34,000. This will be (give or take) $14,000 over the $19,000 (and change) limit. In other words, I will have to pay back to social security one dollar for every $2 I make from that $14,000 pot.
In other words, when all is said and done, I will owe Social Security $7,000. Presently, I earn just shy of $17,000 per year in SS benefits.
Is it worthwhile to take a job for $34,000 when I will be on the hook for $7,000 that I have to pay back to SSI?
Thanks for your input.
How old are you? If you started drawing SS under age 66 (I believe its 66 years old) You will pay the penalty. If you are 66 and over, there is no penalty. Also, I believe the threshold now is $18250.
Is it worthwhile to take a job for $34,000 when I will be on the hook for $7,000 that I have to pay back to SSI?
You said "contract job" - is that W2 or 1099?
If W2 - your original numbers are correct.
If you're 1099: You're not earning $34,000.
You'll be deducting a ton of expenses, since you're self-employed. Again, I have no idea what this "contract job" will be. Let's say you have $5,000 of expenses.
Also you are paying quarterly taxes - no withholding is done. If you don't pay quarterly, you'll be hit with interest and penalties. NON DEDUCTIBLE.
Now you're at a $29,000 profit.
Then on that "profit" you pay taxes.
You'll pay double social security and medicare. That's 15.3%
You deduct half of that. $2219.
Now you're down to $26,781.
THEN you get hit by the social security penalty and it is likely to be LESS than $7,000. Do the math on $26781.
Also you said SS benefits and SSI. Which one?
SS - is regular social security
SSI - is social security disability
TWO different programs!
If you're on SSI you CANNOT WORK. That's disability. Your benefits will 100% go away.
If you're on regular SS you can work but get that penalty.
I am under the 66 age limit. I started collecting at age 62....will be 65 this year.
It is NOT SSI. I am sorry if I said that in error.
It will be a W-2 paid out by a contracting/temporary agency who. It is a full time 40 hour a week job that is supposed to run for six months. The limit, by the way for 2022 is $19,560. which means anything I earn over $19,560 will affect my Social Security by a penalty of $1 for every $2 I earn. To make things easy to understand, I'm rounding the logic to say that I will probably make $14,000 over the limit.
The job would be remote, so there are no expenses such as driving, wardrobe, etc. The only thing I'll be giving up for six months is freedom between 8:00 and 4:00ish.....
I am under the 66 age limit. I started collecting at age 62....will be 65 this year.
It is NOT SSI. I am sorry if I said that in error.
It will be a W-2 paid out by a contracting/temporary agency who. It is a full time 40 hour a week job that is supposed to run for six months. The limit, by the way for 2022 is $19,560. which means anything I earn over $19,560 will affect my Social Security by a penalty of $1 for every $2 I earn. To make things easy to understand, I'm rounding the logic to say that I will probably make $14,000 over the limit.
The job would be remote, so there are no expenses such as driving, wardrobe, etc. The only thing I'll be giving up for six months is freedom between 8:00 and 4:00ish.....
If you have a W2 you can't deduct expenses. You can only deduct expenses if you're a 1099.
So, is it worth it to you? That's not for us to decide.
$34,000 will have
$1700 for state income tax (assuming 5%)
$2600 for federal income tax withheld
$2600 for social security/medicare
$7000 for your social security penalty
85% of your SS would be taxable (versus 0% now), which means around $1500 in additional taxes.
Meaning you'll have an extra $18K in your pocket. It is up to you to decide if that's good or not.
Correct me if I'm wrong but....
Also it's not a "penalty. It's a hold back. SS will withhold one dollar for every $2 you make over the income limit. That money will be added back to you later.
No matter the calculations, as others have said only you can decide if "it's worth it."
Maybe it isn't, maybe it IS. On the other hand....
Maybe it is, maybe it isn't.
I have seen somewhere (might even be SSA site) info on how long it takes you to get all the withholding back over time. From what I recall it took quite a while.
(I went back and found it)
I found this on the SSA website. But still think real world examples could help enlightens all about how it works.
Correct me if I'm wrong but....
Also it's not a "penalty. It's a hold back. SS will withhold one dollar for every $2 you make over the income limit. That money will be added back to you later.
The withheld money, for the six months or so, is gone. Forever. So yes, it is a penalty.
True, after the six months is up, you get your original benefit check.
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On one hand the page says you'll get back the withheld amount at FRA. Then at another point it seems to say you can get that withheld amount the next year. It's confusing to me. Which is why I don't plant make over the limit. Personally I don't have the patience for the complications.
It says:
"You can get Social Security retirement or survivors benefits and work at the same time. But, if you’re younger than full retirement age, and earn more than certain amounts, your benefits will be reduced. The amount that your benefits are reduced, however, isn’t truly lost. Your benefit will increase at your full retirement age to account for benefits withheld due to earlier earnings. Spouses and survivors, who receive benefits because they have children who are minor or have disabilities in their care, don’t receive increased benefits at full retirement age if benefits were withheld because of work."
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"If you’re younger than full retirement age during all of 2022, we must deduct $1 from your benefits for each $2 you earn above $19,560.
If you reach full retirement age during 2022, we must deduct $1 from your benefits for each $3 you earn above $51,960 until the month you reach full retirement age.
These examples show how the rules would affect you:
Let’s say that you file for Social Security benefits at age 62 in January 2022 and your payment will be $600 per month ($7,200 for the year). During 2022, you plan to work and earn $23,920 ($4,360 above the $19,560 limit). We would withhold $2,180 of your Social Security benefits ($1 for every $2 you earn over the limit).
To do this, we would withhold all benefit payments from January 2022 through April 2022. Beginning in May 2022, you would receive your $600 benefit and this amount would be paid to you each month for the remainder of the year. In 2023, we would pay you the additional $380 we withheld in April 2022.
Or, let’s say you weren’t yet full retirement age at the beginning of the year, but reach it in November 2022. You expect to earn $52,380 in the 10 months from January through October. During this period, we would withhold $140 ($1 for every $3 you earn above the $51,960 limit).
To do this, we would withhold your first check of the year. Beginning in February 2022, you would receive your $600 benefit, and this amount would be paid to you each month for the remainder of the year. In 2023, we would pay you the remaining $460 we withheld in January 2022."
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There's also a table on the page that I don't quite understand.
ETA: I re-read it and I guess because this example is for someone who WOULD REACH FRA in 22, THAT is why they would get the money added back in 2023. And if they still wouldn't be FRA, they'd have to wait until they are FRA, be it in 2024, 0r 2025, or later. The further out your FRA the longer you have to wait to get that money back
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