Coffee heat rising

Early Social Security: A way around the earnings limit

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Social Security allows you to start receiving benefits at one of three ages: at 62, at about 65, or at 70. The longer you delay the more you appear to be earning. This results from an actuarial calculation. A flat amount is designated for each American who reaches old age; the older you are when you start collecting, the more you receive monthly—the reasonable assumption being that the older you are, the fewer years you will have to receive your designated cache of dollars.

About three-fourths of Americans start their benefits “early,” at age 62. Many can do so because they have enough savings to live on, or are close enough that a small Social Security payment will get them out of the salt mine. Others are faced with life circumstances, such as layoffs or sickness, that force them to take the money early. And because the government has been slowly pushing back the age of so-called “full” retirement, for many of us that age comes well past the time we feel we should no longer have to work. In my case, “full” retirement doesn’t come until age 66.

If you take so-called “early” retirement—that is, you choose to start drawing benefits at 62—you get a reduced amount. If you wait until age 70, you get a significantly larger benefit. For example, in my case the difference between starting Social Security now and waiting until age 70 would amount to $1,029 a month. The difference if I waited until age 66 would be about $300 a month…enough to ensure that I wouldn’t have to teach one (count it, one) of six freshman comp courses a year to survive.

To discourage people from drawing their benefits at the earliest possible age, Social Security penalizes you for working. Until you reach “full” retirement age, every two dollars you earn above $14,160 results in a dollar confiscated from your benefits. A w4 estimator can help do the math for you. Since neither my $13,944 Social Security benefit (gross: after-tax would be around $11,400) or a gross of $14,160 is enough to live on, this represents a very big problem. Given the ambient ageism that infests American society plus the practical problems entailed in hiring older workers, the likelihood that I will get a full-time job at 64 is almost nil. So I’m faced with two years of poverty (or having to draw down 7 or 8 percent of savings!) before I can start earning enough to live on, and by then my sources of freelance income will have dried up..

As it develops, however, there’s a work-around for the self-employed. It’s called incorporation. The proceeds of an S-corporation do not register for Social Security purposes. This is not true for a C-corp. Here’s how my tax lawyer explains it:

An S corporation is a pass-through entity whose income is taxed directly to the shareholders. In that respect it is like a partnership. The difference, however, is that S corporation income is not subject to self-employment tax (as it would be in a partnership or Schedule C (sole proprietor)). Therefore, S corporation income is not considered to be “earnings” for Social Security purposes.

 

However, as a more-than-5% owner of an S corporation, if you are also an officer (which you would be), you are required to take “reasonable compensation” (W-2 wages) for your duties as an officer of the corporation. Right now, it is the only way IRS can assess FICA/Medicare in an S corporation. If you do not take reasonable salary, IRS will attempt to assess FICA/Medicare on your total withdrawals (and perhaps the total income) of the S corporation. They will assess whatever they can get away with. The reasonableness of the salary depends on the total income of the corporation.

In other words, you can have self-employed income flow into an S-corporation and then have the corporation pay you in salary and dividends. Not only do you get around the $14,600 earnings limitation, you don’t have to pay the usual double dose of FICA levied on self-employed workers.

So, the solution is to form an S-corp that will function as an umbrella for the several sources of freelance income that trickle into my bank account: The Copyeditor’s Desk, HW&E (my original freelance entity, separate from the partnership with Tina), and Funny about Money. None of these will earn much, but taken together the proceeds could at least cut down the number of freshman comp courses I’ll have to teach. That will improve the quality of my life by several orders of magnitude.

A person who runs a business that makes a decent income could profit nicely from this strategy.

Laid-off Employee to Boss: Think again!

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Well, it took a load of chutzpah to turn around and tell Her Deanship that her and her deanly pals’ decision to shut down our office and can all five of us is all wet. As in…i can’t buhlieve i did that!

Apparently she’s so stunned she can’t speak: nary a reply has come back since yesterday’s memo was dropped into the Wells of Silence. Not even the usual two-word “thanks, vh.” One colleague points out that she probably has other things to think about. My paranoia, however, suggests she’s thinking how to say “forget that!” LOL!

Ultimately I recruited a half-dozen full and associate professors—two of them very husky full bulls, indeed—to sign onto our memo. We argued that shutting down the office, which is unique to North America and, as far as we know, to the entire planet, would be penny-wise and pound-foolish, since its creation  entailed a huge investment of talent, administrative diplomacy, cash, time, and effort and it will never be resuscitated if it’s allowed to die now. 

Her Deanship, as we know, was one of the administrators who was responsible for bringing our operation into being, and she has told at least three of our colleagues that she regards it as her baby and regrets having to close it. So there’s an outside chance that her silence comes about while she argues with her co-deans and the rather scary vice presidents that they should accept our proposal, or some variant thereof.

Even if our scheme works, it won’t make a lot of difference for me, financially. The real point here is to save our unit, which has a great deal of potential that should not be wasted. Personally, the main advantage would be that it would allow me to delay collecting Social Security for another 18 months, upping my gross income by a grandiose $304 a month. On a nine-month basis, my salary would drop to about what it was when I was teaching, well below the state’s median income.

Instead of prorating that piddling salary over twelve months, as I used to do, the plan now is to be paid over nine months and then use savings to cover the two summers between December and the time I reach full retirement age. Combining regular monthly savings, the extra amounts that have accrued in my various savings and and checking accounts, and the amount I’ll net teaching three community college classes in the fall, I’ll have about $21,000 above and beyond the $23,000 saved last year to pay off the second mortgage on my house. My house will then be free and clear (again), and my living expenses should drop to around $1,840 a month. Figuring I’ll probably need around $6,000 per summer, there’s enough to cover two summers with one and a half left over!

The scheme’s biggest advantage for me is that it would allow me to delay major drawdowns from my retirement savings for a couple of years, by which time my investments may have had a chance to recover a little. This would be good, obviously. But it’s not imperative: my financial advisor has shown that I can live comfortably enough, even on the present remains of my savings. And obviously, I won’t recover the losses of the past six months in just two years.

Much of the angst brought on by this forced early retirement has been resolved by the discovery of a nifty workaround to get past the $14,100 limit on earned income for those who take “early” Social Security. I’ll tell you about this tomorrow.

w00t! Funny lives!

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It was a rough passage, but thanks to Mrs. Micah, Funny about Money made it to BlueHost in one (very large!) piece. She and the Mr. did an incredible job on what turned into a very difficult project. Almost all the posts have now come across intact. Some of the formatting (such as colored fonts and diacriticals) had to be tossed overboard, but otherwise, the content by and large is back on terra firma.

Many, many kudos to Mrs. Micah, whose determination to make this work prevailed when I was ready to give up. Next time you need a blog consultant, Mrs. M is definitely the go-to person! 

♥ ♥ ♥ ♥ ♥

Getting closer!

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Wow! What an adventure this migration has been. I would not have had a snowball’s chance of moving Funny to BlueHost by myself. It’s been quite a challenge for Mrs. Micah, who’s an expert. Apparently the issue is that quite a lot of strange code lurks in the innards of Funny about Money, with many squirrelly results. Mr. Micah, himself a university-trained technoguru, was called in on the job, and together they’ve been wrestling with this thing for many more hours than any of us bargained on.

Funny was born on iWeb, Apple’s allegedly idiot-proof blogging platform. It’s easy to use, but also pretty limited in scope; after the MobileMe fiasco, I decided to move FaM to WordPress, which can be accessed from any platform and from any computer that’s online. 

Natch, WordPress will not import from iWeb. This meant I had to copy each post and page out of iWeb, store it in Word, and then import it into WordPress. One. at. a. time.

WordPress doesn’t like Word, which as you know is awash in squirrelly code. So instead of pasting directly into a WordPress post, you have to run the copy through a kind of “scrubber,” conveniently provided on the toolbar. I thought I’d done this for each and every entry. 

However, it was a mind-numbingly tedious chore, which I performed at night while parked in front of the television, itself a mind-numbing state. So it’s entirely possible that an article or two accidentally got slapped directly from Word into a post. We’re told this can create all sorts of havoc. But at WordPress.com, things seemed to work smoothly enough. 

The Micahs theorize that the Wordscrubber sometimes fails to remove all the offending code. That also could be an explanation. Or it may be that something came through from iWeb (which creates an impenetrable barrier between user and code for all but the most MacTechie). 

Whatever the cause, I’m beginning to wonder if the thing is corrupting as it goes. An hour ago Mrs. M celebrated success. When I looked at it, most of the site seemed OK, but then on second and third glance more and more posts proved to be truncated…at least one or two of which I’d swear were just fine the first time I saw them. 

There’s a Feedburner feed. I have yet to figure out how to make it readily available to you, but you can click on that link. At the moment the posts are out of order, but with any luck we’ll get that straightened out, too. And there’s you can sign up for an e-mail feed, which I haven’t experimented with yet. 

Mrs. Micah has staggered out of the wrestling ring. I also need to give up for the nonce: spent the better part of a week writing a proposal to save our office at the Great Desert University, bandying ideas back and forth with half a dozen colleagues. Finally sent it off to Her Deanship this afternoon. She hasn’t even bothered to respond… Experience suggests that the Wells of Silence effect is never good. Not that I seriously expected it would fly, anyway.

So, with everybody too exhausted to move, à demain.

Bankbooks and Financial Records: Things people say about themselves

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Officer Canciverra of the Phoenix PD just came by to pick up a checkbook La Maya and I found on the ground during our morning stroll. The owner’s address is in Tempe, so pretty clearly it didn’t just happen to fall out of her purse in the oleanders, 20 miles from home.

Interesting, the things your checkbook says about you. People reveal a great deal about their lives in ordinary, insignificant-looking daily records. Lawrence Stone, a controversial and entertaining historian of Britain’s early modern period, applied this fact with great flair when he produced The Crisis of the Aristocracy, in which he concluded that the British nobility went through a period of hard times near the end of Elizabeth I’s reign. As a toddling researcher in England, I studied Prof. Stone’s work and then, in a graduate-studenty way, tried to go forth and do likewise.

Her handwriting suggests our Chase Bank customer is an elderly woman. She pays $800 a month for what she enters as “cash rent.” You can’t rent much in Tempe for that price. It’s a debit, not a credit, so presumably it’s what she pays for a roof over her head—probably a room or backyard studio behind someone’s house. And that someone likely isn’t reporting the rent to any taxing authorities.

She has a number of relatives who share her last name. She paid airfare for several of them to come to Arizona last Christmas, and one of them received $100 as a Christmas present from her.

Another of her relatives, Donna, evidently was sick and disabled for a long time. Every month our checkbook writer paid $900 for Donna’s healthcare. In February, though, she voided the $900 check. A couple days later, she paid almost $2,500 to a mortuary.

After that, a series of checks are voided and several transactions are corrected, as though she went through a period of confusion and, probably, grief. Donna apparently mattered a great deal to her.

Her last check was written on March 30, leaving a balance of around $32,500 in her account. Ominously, one check is missing between that check number and the top check in her check pad.

I hope she wasn’t ripped off, or if she was, that Chase made good on the forged check.

So it goes. Our little lives are full of quiet drama, aren’t they?