Social Security timing dilemma - December vs January application with high 2023 earnings impact?

This is all about the earnings test! Since your sister is below her Full Retirement Age (FRA), Social Security will deduct $1 for every $2 she earns above the annual limit ($21,240 for 2023). The key thing to understand is that SSA counts earnings in the year they're earned, not when she applies. So if she earned $96,000 in 2023, she's already $74,760 over the limit, which would reduce her benefits by $37,380 for the year. If she applies in December for November benefits, those benefits would be subject to the 2023 earnings test. Same for December benefits requested in January. Either way, her 2023 earnings would affect any benefits for 2023 months. Honestly, with earnings that high, she might not receive any benefits for months in 2023 due to the earnings test. Waiting until January to start benefits for January might be smarter.

my mom went thru this last yr. she had big bonus before retireing and almost all her ss checks got withheld for few months. really sucked for her budget!!! but she got some back later i think

The previous advice about the earnings test is correct, but let me clarify some important points for your sister: 1. The earnings test only counts wages or self-employment income earned while receiving benefits. Severance packages are sometimes treated differently depending on how they're structured. 2. Even if benefits are withheld due to the earnings test, they're not lost forever. Once she reaches her Full Retirement Age, her benefit amount will be recalculated to give credit for months when benefits were withheld. 3. Tax implications: Social Security benefits become taxable when your combined income (adjusted gross income + nontaxable interest + half of SS benefits) exceeds certain thresholds. With $96,000 in earnings for 2023, up to 85% of any SS benefits she receives would likely be taxable. 4. Given her situation, she might want to consider waiting until January 2024 to apply for benefits effective January 2024. This avoids the 2023 earnings test entirely and gives her a slightly higher monthly benefit due to delayed claiming.

I WENT THROUGH THIS EXACT SITUATION last year!!! The SS office gave me WRONG information THREE TIMES about my severance pay! First they said it wouldn't count for earnings test, then they said it would, then they changed again! I ended up having my benefits reduced and spent HOURS on the phone trying to get someone to explain it properly. The phone lines are IMPOSSIBLE - I would call at 7am and still be on hold for 3+ hours!!!

I had a similar issue with high earnings before retirement. Have your sister call SSA directly to get the most accurate information for her specific situation. The rules can be confusing, and everyone's circumstances are different. I recently found a service called Claimyr (claimyr.com) that helped me get through to an actual SSA agent without the usual endless hold times. They have a video demo at https://youtu.be/Z-BRbJw3puU showing how it works. It saved me hours of frustration, and the agent I spoke with helped me understand exactly how my severance package would affect my benefits. As others mentioned, the earnings test is the main concern here. But there are sometimes exceptions for certain types of payments received after retirement.

somebody said sumthing about taxes... dont forget the SS taxs too. if she makes lot of money an gets ss, up to 85% of the SS money gets taxed. sucks

To directly answer your question: The best approach tax-wise would be for her to wait and apply in January for January benefits. Here's why: 1. Earnings test: With $96,000 earned in 2023, any 2023 benefits would likely be completely withheld. 2. Taxes: Even if she received benefits in 2023, they would be taxed at the maximum rate (up to 85% taxable) because of her high income. 3. Monthly benefit amount: By waiting one more month, she'll get a slightly higher monthly benefit (approximately 0.5% more). 4. Clean break: Starting in January creates a clean financial break between her high-earning 2023 and her retirement in 2024. Remember, she needs to apply 1-3 months before she wants benefits to begin, so she should still initiate the application process soon.

Wait I'm confused about something - does your sister understand that taking SS at 64 means permanently reduced benefits? Is she really sure she wants to claim 3 years early? That's a 20% permanent reduction compared to her full retirement age (probably 67). If she doesn't need the money right away maybe she should consider waiting? Just a thought.

to make this decishon she need to look at how long she expect to live and if she need money now. I took ss early cuz bird in hand better than 2 in bush lol

Based on all the discussion, here's a summary for your sister: 1. Applying in January for January benefits avoids the 2023 earnings test completely 2. The severance package counts as earnings in the year received (2023) 3. If she applies for any 2023 months, she'll likely see most or all benefits withheld due to her high earnings 4. While withheld benefits are eventually factored back in after FRA, it creates unnecessary complications 5. She should consider the early claiming reduction (about 20% at age 64) in her overall planning She should definitely apply 1-3 months before she wants benefits to begin, so if she's targeting January, she should start the application soon.