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My mom is planning to collect social security next year, on her birthday, which is in May. We both work for, and own, a small business and therefore have direct control over her salary. If she drops her salary lower at the start of 2019, will that have any effect on the SS that she will claim in May? I know the calculation is based off the highest of the past X number of years (10 I think?), but does 2018 count as the final year used in that calculation or will the partial earnings of 2019 be significant? Thank you.
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Tink,
SS is pretty complicated. The benefit is calculated on the high 35 years of earnings (which are indexed for inflation). Will your Mom be full retirement age when she retires?
Here is a link to Social Security on how the retirement benefit is calculated https://www.ssa.gov/pubs/EN-05-10070.pdf
You can get an estimate from SS with different retirement dates. -
Thank you. I suppose I might be making it more complicated than it needs to be. If she only works half the year before claiming SS, 2019 won't be in the top 35 highest years so it's not relevant. I think
Thank you!
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There is also taxing 85% of the SS benefit depending on other income. Or how old she will be.Comment
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Here is some more information--if she has not yet reached full retirement age--(take note of the special rule ):
"If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit. For 2018, that limit is $17,040.
In the year you reach full retirement age, we deduct $1 in benefits for every $3 you earn above a different limit. In 2018, the limit on your earnings is $45,360 but we only count earnings before the month you reach your full retirement age.
If your earnings will be over the limit for the year but you will be retired for part of the year, we have a special rule that applies to earnings for one year. The special rule lets us pay a full Social Security check for any whole month we consider you retired, regardless of your yearly earnings."
Links from social security that will provide more detailed information:
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