Tuesday, March 13, 2007

Great News About Social Security

Well, I've just done some research and I am pleased about what I learned about social security. I knew that there was a downside to retiring early. The check you get for an early retirement significantly reduces the benefits that you might have received if you waited until full retirement. However, I also knew that there were rules about what you could and could get in terms of income while still collecting social security. However, I discovered that I was wrong.

The limits come into play only for people who are NOT at full retirement age. If you are at full retirement age, you can earn as much as you want with no penalty. So these wierd limits only apply to people who are "younger than full retirement age during the whole year".

http://www.socialsecurity.gov/pubs/10069.html

And even better, investment income, capital gains, 401k and IRA distributions etc are never counted as earnings that could reduce your social security benefits. Instead, the only things that are considered to be part of the earnings that reduce your benefits are actual earnings. That is, money that you get for working.

http://www.socialsecurity.gov/pubs/10069.html#count

So, it is generally easier to retire early as long as you can cover your expenses etc. from the time you retire up through the point where you get medicare. Obviously, health insurance is the big expense there. Many people look at a secondary insurance anyway in order to cover expenses that medicare doesn't cover so I don't think (I hope) it will be that big of a shock in terms of coverage.

The reason I was so happy to read this is because I truly think that I will be "earning" money until the day I die. But I am not sure how much of that money will be money I worked to get. Since I really like to focus on passive income, it would appear that this means that I am in good shape with regard to the current setup of social security.





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