What Income Counts Toward The Social Security Earnings Test?

Mar 31 2017 - 10:00am

Dear Larry, I will be 62 this October 2017. I have a daughter who will be 6 years old this October. Studying my SS report and conferring with someone at SS, I drafted a comparison of payments that shows me starting my SS benefits at 62 (and 2 months, they tell me) which also triggers a payment equal to 50%-of-that sum to my daughter. To make is simpler, starting in January 2018, I would be getting $16,320/year; and my daughter would be getting $8160/year up until she turns 18. I compared the total amounts for us if I start at 62; 66; or 70 and it really is more for us if I look at supporting her college fund by starting at 62. The problem is: I can't sustain a family on $16,320/year. My questions are:
1) Does the Social Security Administration measure my income as my AGI? If so, I might be Ok since I have a huge right off/loss that is bringing my income down to zero on paper?
2) Can I start the SS benefits at 62 and then suspend them if I have too much income?
3) What is "too much" income and what are the repercussions. We are living on a tight budget and I am trying not to make mistakes at this stage of my life.
Any other thoughts about being a late-in-life parent and trying to survive out here?
Many thanks! Sue


Countable income for earnings test purposes is any combination of gross wages and net earnings from self-employment. So, you cannot deduct prior year losses even if it's permissible to do so for income tax purposes. Refer to Social Security's website for detailed information on the exempt amount of earnings, and withholding rules for beneficiaries who exceed those limits: https://www.ssa.gov/planners/retire/whileworking2.html.

You can potentially start drawing benefits at age 62 if your earnings are low enough to permit you to do so, and your benefits can subsequently be suspended if required due to your earnings. You can't voluntarily suspend your benefits prior to full retirement age, though.

By the way, your benefit rate would be reduced if you start drawing prior to your full retirement age, but your daughter's benefit rate would not be reduced. She could get 50% of your full retirement age rate (PIA) even if you take a reduced benefit. Therefore, the estimate you cite showing that she would get exactly half of the amount that you would receive if you start drawing at age 62 doesn't sound right. You may want to consider running the maximization software available on this website in order to help you determine your best strategy.

Best, Jerry