Getting disentangled from the Great Desert University and onto Social Security is a nightmare hassle! Right now I have an inch-thick folder of information, instructions, and policies about retirement, and it’s growing. There’s another folder full of paperwork specific to Social Security and Medicare.
Today I learned that when the state of Arizona pays me the first of three payments for my accrued sick leave (known appropriately as “RASL,” as in “you get to rassle around trying to collect this”), I will owe FICA and Medicare taxes on it. And, even though it represents money earned in 2009, it will not be paid until 30 to 90 days after my job is terminated.
Canning Day is December 31. That means the RASL will come in 2010, after I’ve started collecting Social Security. And that means the $6,355 payment will count as part of the maximum $14,100 I will be allowed to earn in 2010.
This will mean that in order not to have my Social Security benefits docked, I will have to refrain from teaching three of the six community-college classes planned for 2010. And that will mean I will have to use the RASL to live on, rather than putting it into retirement savings, as planned.
Item: I can’t afford to stand down from teaching next year. When you do that, you drop off the departmental chair’s radar, and you may find yourself never being hired again. I know: this has happened to me before. Next year I will need to teach as many sections as I can get, so as to build a track record that will get me hired in the future for as long as I can dodder into a classroom.
Item: I need to put that RASL money in savings!!!!! My investments are down more than $120,000 from where they were a year or so ago, and they certainly aren’t going to regain that in the six months I have left to work at GDU. I just can’t afford to substitute RASL for teaching income.
The university will owe me a little over $19,000 in RASL. This amount will be paid in three annual $6,355 installments: in 2010, in 2011, and in 2012. I will reach age 66 in May of 2011; after that, the dock-your-Social-Security trick stops.
Plowing through the stack of policy statements on RASL, I see that a) you can delay applying for RASL as long as 180 days after you’re terminated, and b) you can defer the first year’s payment (and only the first year’s payment) by rolling it into a deferred compensation plan. And c) the second and third annual payments are disbursed on the anniversaries of your first year’s payment, which comes 30 to 90 days after the state receives your application.
So, to avoid having my Social Security benefits dinged by the RASL and to avoid being forced to use the RASL for living expenses, I’ll have to put two maneuvers into play.
First, I’ll need to delay applying for RASL until the middle of April, so that the soonest possible time it would be paid is mid-May, after my 66th birthday. If I fail to do that, then the second RASL payment will also arrive before I reach the “full” retirement age of 66, and I’ll be dinged for that one, too. If I time my application so that the first RASL payment arrives after May 7, 2010, then the second RASL payment will not arrive until I’m 66, at which time I can earn as much as I want (or can) without affecting Social Security income.
Second, I’ll need to establish a deferred compensation plan before my job ends. This is required. That may mean that even though the damned furloughs just ended, I’ll have to continue having my pay docked. That I will get the money back sometime in the remote future is irrelevant to the fact that I need all my paycheck to stash savings to live on after I’m fired.
The deferred compensation plan is managed by a private provider. That means, of course, that there’ll be fees involved. So I’m going to have to pay someone for the privilege of letting them take my money away from me. Isn’t that sweet?
That’s just the start of it. Then there’s the realization that because I’m being canned in December I have to apply for Social Security in October in order to get the payments started in January. But I will not get my last paycheck until after January 1, because of PeopleSoft’s obnoxious lagging pay scheme. Furthermore, because of the furloughs, the gross amount on an October paycheck will not reflect accurately what GDU will pay me over 2009’s twenty-six pay periods. Nor will I have statements from my freelance clients, nor will I have any clue how much my S-corporation will pay me between September and December 31.
So, how will the Social Security Administration calculate my benefits, when no accurate statement of my 2009 pay will be available until after those benefits are supposed to start?
Then there’s the business of all the vacation pay the SOBs owe me: $5,287 worth. This payment also will come forth in January, 2009.
Will that be held against my Social Security earnings, even though it represents pre-2010 income? Can that amount be rolled over into this deferred compensation plan?
And if I have to roll it over…my GOD! I intended to use that money to cover COBRA. If I have to roll it over into deferred compensation, I won’t have anything budgeted to pay for health insurance between January 1 and May 7, 2010. I’ll have to dig into my retirement savings to cover that.
The more I look into this stuff, the more questions come up and the more unfair the whole mess looks. No wonder I grind my teeth all the time!
You can talk to the people in the Social Security Office; a friend says they are helpful and knowledgeable.
Also–couldn’t a deferred comp plan or SEP IRA serve to reduce your income from teaching? It doesn’t really matter where you take the money from as long as you get it.
OR–if you are still planning on doing the thing where you pay back social security to reset at 70, I think you get all the taxes back!
I have a colleague who is hoping never to retire so he doesn’t have to deal with all this–including cleaning up his office.
@ frugalscholar: I was just up to the SS office the day before yesterday: consumes an eighth of a tank of gas and is in the opposite direction from GDU. So what I’m doing is collecting questions, so as to consolidate them into fewer trips. That’s definitely one of the queries.
Clearly, if I can roll community college pay into deferred compensation, I could take the vacation pay and then move the adjunct pay off the table. It would help, since three classes a semester will put me $300 over Social Security’s earnings limit.
I think your employer has to participate in the deferred comp plan, doesn’t it? I’ll ask while I’m at this outfit’s office (they have a punch-a-button runaround on the phone, so I’ll have to physically drive down there to talk with someone…argh!!!!) whether I can defer income from the community college district. Remember, I’m adjunct, so not a “real” employee of the district. Although the district withholds Medicare & taxes, they regard adjunct faculty as contractors. So even though if they have a plan for f/t employees, adjunct instructors may not qualify.
The other question, of course, is just how much this outfit charges in management fees. I’ll bet it’s not cheap. God, how I resent having to pay someone to hold my money to protect it from confiscation by the government!
The problem is, I really do need to put these little “windfalls” (har har) from GDU into long-term savings. If Social Security gives me two dollars with one hand and then rips off a dollar with the other and I can’t find a way to shelter the money GDU will pay after SS gets started, then I will have to use the RASL and vacation pay to buy food and gasoline. We’re talking about a 2010 net of around $8300 that could and should go into Vanguard or Fidelity funds ASAP, to help rebuild my devastated life savings. Add all three years of RASL into the pot, and it represents about $17,500 that should be going into my retirement savings…not to the Safeway, the Costco, and the utility companies!
Another way to reduce your income is via losses on your side businesses–e.g. your blog and your editing biz.
OR you could reduce your profits via a SEP-IRA or Keogh.
In 2009, you may make little enough to claim the “Saver’s Credit” for whatever you put in an IRA or other tax-deferred acct.
My head spins. This is the advanced version of the game I was playing on my post-layoff to-do list Saturday night and Sunday afternoon — so much paperwork and sorting out of rules, regulations and exceptions thereof!
Best of luck!