All Articles

Dealing With Job Loss and Social Security

Fred’s supervisor said he would “probably” be returning to work by September. That was in March. As the days passed, and the fall leaves changed, so did Fred’s positive outlook. 

At 62, Fred is receiving early Social Security retirement benefits. While he felt it was not the ideal thing to do at the time, he knew it was the necessary thing to do to survive. If there is a saving grace, it is that since these benefits are his only source of income, technically, Fred is not required to pay income tax on them. 

Part Time or Full Time Options

The Social Security Administration allows workers like Fred to earn up to a certain yearly limit – before they reduce the benefit – to return to work and collect retirement benefits at the same time.

With earnings adjusted annually, $1 is deducted from Fred’s benefit payments for every $2 he earns above the 2020 limit of $18,240. This limit increases to $18,960 in 2021. Fred has options to consider:

·         If he is called back to work on a part-time basis, his benefits can supplement his income.

·         If he is called back to work on a full-time basis, he can continue receiving benefits and pay the necessary income tax on the overages.

·         If he decides not to continue the benefits within the first 12 months, he can withdraw his application and stop receiving payments. At that point, however, he is required to pay back all the Social Security benefits he had received.

For every year Fred claims benefits before he reaches 66, he reduces his monthly payments by almost 7%.

There Are Benefits to Receiving Benefits

If Fred reached his full retirement age at 66, in 2020, $1 in benefits is deducted for every $3 – but earnings are only counted before the month of Fred’s full retirement age birthday. The limit on Fred’s earnings – for the months before reaching 66 – is $48,600.

Starting with the month Fred reached full retirement age, his birthday month, he can get his benefits with no limit on his earnings. When he reaches full retirement age, Fred can earn as much as he can without an income cap. There are changes for 2021:

·         Social Security payments will increase by 1.3% to keep up with inflation

·         Full retirement age increases to 66 and 10 months for those born in 1959

·         The maximum amount of earnings subject to Social Security tax will increase by $5,100, climbing to $142,800. Workers pay 6.2% of their earnings into Social Security until their income exceeds their taxable income.

When the Social Security Administration determines how much to deduct from your benefits, they count on wages you make from working or net earnings if you are self-employed. They include bonuses, commissions and vacation pay. And that’s it.

Under no circumstances do they include pensions, investment income, annuities, interest, benefits from veterans or other government or military retirement benefits.

Be Wise and Beware – of the Scams

The Social Security Administration and Office of the Inspector General receives reports of scammers impersonating SSA employees over the phone, to request personal information or money. Imposters threaten and demand immediate payment to avoid arrest or legal action. Here’s how you can protect yourself:

·         If you receive a call and no caller ID appears to identify the caller as a government employee, it is a scam.

·         If you receive a call and the caller demands sensitive personal information, payment via gift card or pre-paid gift card or wire transfer, it is a scam.

·         If the caller makes threats when you do not comply with their request, it is a scam.

The best thing you can do is to hang up in all three examples. The worst thing you could do is to give them money or personal information. The smartest thing to do is report the scam immediately at OIG.SSA.GOC/REPORT. You will remain anonymous.

Scammers are now resorting to a “benefit increase” due to COVID-19. So, now more than ever during the COVID-19 pandemic, be very cautious of unsolicited calls, letters, emails or texts offering a benefit increase.

Be advised, the Social Security Administration will never offer you a benefit increase in exchange for payment. Here is how you can report fraud:

U.S. Mail: Social Security Fraud Hotline
P.O. Box 17785
Baltimore, Maryland 21235

FAX: 410-597-0118

Telephone: 1-800-269-0271 from 10 a.m. to 4 p.m. Eastern Standard Time, Monday through Friday, excluding Federal holidays.

TTY: 1-866-501-2101 for the deaf or hard of hearing.

If you questions or concerns regarding your Social Security benefits, your investment portfolio, and your income taxes, speak with a Hefren-Tillotson advisor today.

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.

What can we help you find?