Question: I am planning to retire on August 1, 2008. I am 64 years old and not planning to collect social security benefits for another 2 years. If I get paid in lieu of my unused vacation time, would it affect my social security payments? --Jitendre from NJ
Answer:
Unused vacation time is counted as earnings, but there are limits on this for purposes of the “retirement test.” Any payments made on account of retirement are counted as earnings in the month last worked, unless they are earned in a prior year, in which case that portion of the vacation pay attributable to the prior year does not count in the current year’s earnings for “retirement test” purposes. If you don’t plan to apply for benefits until 2010, the 2008 earnings will have no effect for the “retirement test” in 2010. If the unused vacation time is paid out to you after you retire this year, and you have accumulated so much time that it extends into 2010, it still doesn’t affect 2010 benefits.
In fact, no matter how high your 2008 earnings, you could collect reduced retirement benefits for August through December. Because your earnings in these months will be under the monthly limit of $1,130 applicable to you this year, benefits for these months cannot be withheld. These are called “non-service” months. I discuss this in Chapter 8, Social Security Benefits Handbook. Click on the link and scroll down to Section 804, The Monthly Earnings Test.
But Jitendre, your plan to wait till age 66 to collect benefits even though you are retiring now may not be in your best interest. The only reason to forego benefits now would be to get an unreduced benefit at age 66. As I have discussed in an article which was published on the Basil & Spice blog, this may not pay off for you. You may read my article that was posted on April 20, 2008. Click the title "Social Security Benefits, Now Or Later?"
You may want to reconsider passing up two years of benefits, or at least figuring out how long it will take to recover them after 66.
Stephen Carter and Joan Strewler-Carter are the Co-Founders of www.WhatsNextInYourLife.com and are the authors of the book What’s Next In Your Life? Joan,
the former president of the Heartland Region of Right Management
Consultants and co-founder of Life Options Institute, is a certified
retirement coach and career counselor and Stephen acquired the
Heartland Region of Right Management, the world's largest career
transition firm in 1990. Their mission is to help the more than 76
million baby boomers headed toward retirement, asking them to start
thinking now about What's Next In Their Life? Their philosophy is that
it is never too early to start thinking about the non-financial aspects
of retirement.
As more than 76 million baby boomers, that’s more than one-quarter of the US population, enter their 50’s and 60’s they are confronting the “r” word…retirement. But theirs is a generation of over-achievers; a generation that will not stop working altogether in the traditional sense—nor will they necessarily want to keep working full-time.
Determined not to accept the traditional limiting definition that the word retirement brings, boomers are instead looking to the “s” word…secondment: A detachment from their full-time position into a fluid, flexible and non-traditional working arrangement.
According to the Merrill Lynch New Retirement Study published in 2006, 71 percent of boomers say they will work after retirement.
They are exploring new alternatives such as starting a new career or business or securing short-term secondment in the field in which they were trained.
A number of companies are offering their retirees the opportunity of being seconded, sometimes to other company divisions. This gives the retiree the opportunity to keep himself active in the industry by utilizing some of his previous experience and knowledge.
The idea of offering their services on a contract basis gives them a great deal of flexibility regarding the type of work undertaken and also assists in their transition to retirement.
Russ Creason started his career at General Motors and climbed the ladder to become a highly respected human resources executive for the company. In 1981, he retired. Mr. Creason wasn’t ready to completely stop working so he chose to use the skills he acquired to work as a consultant at Right Management in Kansas City, KS.
When Cherokee, OK-resident Marian Goodwin’s husband Bill died in 2003, her children urged her to sell the funeral home the couple had owned since 1965. But, even though she didn’t have a mortuary science degree and had only handled some administrative duties for the home, she was determined to keep the doors open. She figured out how to reorganize the business, hired a licensed mortician and went back to work.
She works 50 or more hours a week now and is putting her own stamp on the way things are done.
Goodwin has personalized her business by putting her love for western art to work on personalizing the funerals of Cherokee citizens who live in her area.
In one instance she arranged to include the deceased’s boots in the casket flower spray. Men on horseback escorted the casket, which was loaded in the back of the deceased’s pickup along with his dog, to the gravesite.
Communication With Your Spouse Is A Key To Successful Retirement
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