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Social Security’s Bizarre Rules

Well, I got screwed royally by Social Security. Five ways from Sunday!

In the first place, on Friday I checked and learned it really is true that when you’re taking so-called “early” Social Security, if you go even a dollar over the $14,160 allowance for earned income, they take away an entire month’s check. Not only that, but because they pay your Medicare Part B out of the monthly check, you get to come up with $111 out of pocket to cover that, too!

You get the money back the following January. But until then, you just go hungry.

It gets better. If your greed exceeds the amount of one month’s gross check—even by a dollar—they take away another whole month’s benefit.

In other words, over the entire 12 months of 2010, if I earn $1,276 more than $14,160, I lose $2,550—two entire months’ of income—and I have to come up with $222 out of savings to pay for Medicare.

If I earn $2,551 too much, then they take three months’ of payments away, and I have to come up with $333 for Medicare. And so on to infinity.

In other words, if you have the temerity to earn more than a poverty income, they break your back financially.

Because the college (unexpectedly) paid me a stipend to develop the online course equivalent to the amount of teaching a three-credit course, I’m already over the $14,160 limit: three and three at Maricopa County pays you $14,400. I figured I would report this near the end of the year—legitimately, I won’t truly know that much is coming in until we see whether the online course makes, and it doesn’t start until late October. That stipend paradoxically means next fall will be extremely tight, but I’d figured I could make it, probably, because I’d get the post-tax-gouge money back in January.

But because they starve your bank account more and more for each chunk of earnings that equates to a month’s Social Security check, it means I could not apply for the excellent opportunity that recently came up: One of the other colleges was looking for someone to teach American literature and, better yet because it only meets once a week, mythology. I really want to get my foot in the door to teach something other than composition. These courses require a LOT less work, because you’re not having to grade student writing every time you turn around, nor are you required to grade on the basis of their writing skills—all you really have to do is look to see if they more or less did the assignment.

If I had landed even one of those two sections, the extra pay plus the $500 “salary” I have to draw from the S-corp would have caused Social Security to withhold not one, not two, but three checks and gouge me $333 for Medicare. I would net less than the amount I would earn by taking on extra work to help make ends meet.

So, this is intensely frustrating.

It feels like a kind of punishment for doing what Americans are supposed to do: be entrepreneurial. Dare to earn something more than bare poverty wages, dare to get off your duff and do some productive work, and we’ll wallop you upside the head.

I can’t even begin to live on the piddling net from a $14,160 gross. The Social Security income is what’s making it possible for me to survive at all in underemployment. But the $15,000 from Social Security is no more a living wage than is the dinky amount they limit you to earning.

Six sections a year is half-time work. It’s so part-time you don’t even get benefits. To add to the annoyance, an adjunct’s position is extremely ambiguous. My pay statements explicitly say the pay is for contract work. But the district will not pay my S-corporation, which they should do if indeed I’m a contractor and which would resolve the whole issue with Social Security. And my tax lawyer insists I’m not a contractor for the district, I’m an employee.

What’s especially annoying about this is that I had no intention of starting Social Security at age 64. After the crash of the Bush economy, I figured to work until I was 70, since that’s how long it would have taken for my investments to recover their former glory, with regular employer-matched contributions to my 403(b). The only reason I’m taking it now is that I was forced to do so by the destruction of the U.S. and the world economy, something that came about directly from federal government policy and the mismanagement of government policy by elected representatives. It’s not my fault I’m out of work, and it’s not my fault there are no jobs for aged female Ph.D.’s. Or, in Arizona, for anyone else.

So. The hard times—and they have been hard—are will not end when this penurious summer ends. In the fall, I’m going to be $1,275 short of the amount I need to get by. This afternoon I’ll return the curtains I bought to help black out the bedroom so I can sleep past the first crack of dawn; that’ll put a few bucks back in my account. The iMac is showing signs of hard drive failure; the repair job will far exceed anything I can get back from returning the curtains.

Sure do wish I could’ve made something on that yard sale yesterday…

And there’ll be no new dryer, even from Craig’s List, when the junior-college pay starts to roll in next month. Thank goodness most of my stuff can be line-dried. The comforter, when it needs to be washed, will just have to be done at M’hijto’s house.

Yes, I do have emergency savings to fall back on for a month—and yes, I’ll have to use those to get by this fall. But the point is, I shouldn’t have to use emergency savings when I could earn enough, combined with Social Security, to live on. The point is, when you’re earning this little, there’s nothing left to put back into savings. So when I use up that emergency fund, it’s just gone. It won’t be there when a real emergency happens. And with my arm out the way it is, it will only take one more fall, one car accident, one minor injury to make it impossible for me to work…and then I’ll really need that fund.

And yes, I have retirement savings. But I’m not retired. I’m not retired—no, indeed; I’m working 16 and 18 hours a day, seven days a week—thanks to the economic collapse. That money has to sit there without being drawn down until the market recovers enough to rebuild at least some of the outrageous losses that occurred during the crash and that continue to occur because the continuing slide in real estate values here in Arizona continues to sap equity from investments in two very modest houses.

Meanwhile, Congress fiddles as Rome burns…

17 thoughts on “Social Security’s Bizarre Rules”

  1. I know things are tough but George Bush is single handedly responsible for a worldwide recession? How about throwing in global warming and the arrival of killer bees. You might want to let go of some of that bitterness.

    • @ E. Murphy: No, I don’t mean to imply that W. himself is responsible for the current fiasco all by his little self. He was never bright enough to pull that off. Really, Cheney had more agency than W. did, because he was smarter and quite possibly more powerful. W. was the creature of an organized movement to pull this country’s politics to the far right, one that has been amazingly successful. We first saw active stirrings of this movement before the Reagan presidency, and it has built momentum over a good 25 years. I do not think it is a coincidence that the movement grew like topsy during a time when the quality of American public education dropped into the basement.

      The situation we have did not pop out of George Bush’s hat. It didn’t pop out of Ronald Reagan’s hat, either. It was carefully built by people who had as their agenda complete deregulation of industry; offshoring of American jobs; increased, largely untaxed income for the wealthy; and lowered wages for the few middle- and working-class jobs that remained onshore. They got what they wanted, and the rest of us inherited the wind.

      And when it comes to the “blame game,” have you been listening to the crazy drumbeat to blame everything, including the Gulf oil spill, on Barack Obama? I’ve never heard such disrespect of an American president by Americans, and I can assure you, I joined exuberantly in disrespect for George W. Bush and the henchmen who surrounded him. The language that flies in media of all kinds is scurrilous and vile — just take a look at the comments that crop up after any news story on any local news station’s website. It’s as if these people had no understanding of how to address an issue, but can only scream invective, ad hominem. That probably reflects the weak training in logical thinking they received in our public schools, a shortcoming that is evident to anyone who has ever read a college freshman composition paper.

      At least when we disrespected the Bush crowd, it was for good reason. No commonsense, credible reason has been advanced for the orchestrated (and I use the term advisedly) hatred of President Obama.

      “Let go of some of that bitterness”? Does that translate to “lay down, shut up, and take whatever the right dishes out”? I’d prefer not, thank you.

  2. This is scary-as a widow on a pension with basically no retirment savings, I’ll have to access hubby’s social security in a year and then move to mine at the earliest they allow. And I wont have anything to fall back on after that. I have got to get my duckies ina row I guess, and try and earn as much as I can through my small (not off the ground business) and selling stuff. alot of planning for me to do in the next year or so.

    • @ Frugal Texas Gal: Look in to setting up your business as an S-corporation. It’s not expensive, although you have to file a separate tax return. If you keep clear enough books, you should be able to do that in TurboTax for businesses, saving the accountant’s fee. An S-corporation is what’s known as a “pass-through” corporation; the corporation, not you, earns the money. Therefore, the income for your business does not appear on your personal tax return as your personal earned income, and so it is not counted against you for Social Security purposes. The business pays you a salary, which can be quite minimal. My lawyer had mine pay me $500 last year–you’re not paid an hourly wage for the work you do; you’re paid for directing the corporation, which doesn’t take much. Whatever money is left in the corporation can either remain there or can be distributed to you as dividends. Because it’s dividend income, it doesn’t trigger the SS penalty.

      Ask a lawyer. If you can’t afford one, see if you can find a legal aid society or someone who will work pro bono through your county or state bar association.

  3. Funny, I feel your pain. I had a similar incident recently with unemployment. I am a teacher and was laid off in the school year before last. I applied and got unemployment and an additional $25 a week from the feds. I also taught summer school for 2 summers and did subbing during the last school year. I claimed my earnings for unemployment and collected less for the weeks I did the temporary part time work. So just this week when I went to request benefits, I was told I needed to re-apply. Even though I was in only the first extension, with 2 more to go before November. My unemployment pay lasted longer due to my sporadic earnings. Imagine my surprise when I went to collect my $431 a week and was told to reapply. So I did. Now I got stuck with another waiting week – so zero money and a new benefit of $54 less than my old one and without the additional $25 fed benefit. When I called to complain, they said I had a new benefit year because I had earnings!!!! I left $4800 dollars in my old account half way through the first extension and 2 more extensions to go through the end of November before the extensions run out. In other words, because I did not sit home and collect the original benefit and picked up part time temp work, I am screwed!!!!! I was just told that that was the law. I could appeal, but why waste my time? I am really frosted. The moral here is to only apply for, and accept full time regular employment if that is what you previously had – at least until you have exhausted all your extensions.

  4. You can trash George Bush and all Republicans for the last 25 years “for good reason.” But anything said against the Obama administration is done by a right wing conspiracy and their “henchmen.”

    Wow, have you looked under your bed for any right wingers lately?

  5. Also the unemployment gal told me that without any earnings during this time period, I would have remained on my original account and continued through November. The fact that I had earnings at all triggered the new application!!!!
    Apparently the unemployment people don’t want us to take any kind of work we can get!!! What a system.

  6. @ Barb: That is awful! And yes…what a system. It’s not designed to function in a depression, when large numbers of people are out of work through no fault of their own and no one is hiring. It would be one thing if it were reasonable to expect that we could get jobs. But just now, it’s not. At least, not in my neck of the woods.

    @ E. Murphy: Yeah, I check under there all the time. They’re usually scuttling around after dark…think they come out from under the refrigerator when the lights go out. 😉

  7. the adjuncts at our school have the same contract/employee dilemma. I think it is what allows the school NOT to pay any benefits.

  8. I think you’re letting your emotions cloud your judgement if you turn down an “excellent opportunity” because it means a having to temporarily dip into your savings. Next year you will no longer be subject to the same earnings constraints. Which decision are you most likely to regret in a year or two; biting the financial bullet and taking a job that will improve the quality of your life, or “playing it safe” and letting this opportunity slip away?

  9. @ Terri: Don’t know if it differs by state, but in AZ they don’t have to pay you benefits if you’re 49% time or less. Now, three sections, to my mind, is more than half of the usual faculty courseload of five sections, but they probably add faculty governance, advisement, and other activities to the faculty’s job description, so that teaching forms less than 100% of a f/t job.

    @ Pat: True, it may be a symptom of Bag Lady Syndrome, but I just don’t feel safe using up $3,825 so that I can earn $2,400. Especially since ultimately I may end up being forced to have surgery on this arm, which will put me completely out of commission for an entire semester, consuming another $3,300 of savings plus whatever it costs to hire a pool guy, a cleaning lady, and a practical nurse to help me. {sigh} I just have a gut sense that I have yet to see the real rainy day, and I’d better hang onto my savings so as to be prepared when whatever is coming arrives.

    Also, as “opportunities” go, this one is about as nebulous as adjunct teaching in general. Nothing obligates a chair to keep hiring someone to teach a given plummy course. It’s possible that a faculty member got sick or nabbed some grant or got last-minute course release time, and so they’re only hiring for one semester.

    And there’s the fact that Estrella Mountain is about an hour’s drive from my house through cutthroat traffic. Yuch!!

  10. Hello again. Just this morning I got an offer for a 2 month sub job. I took it, because in the last year and a half I haven’t even been able to find that. So again for 8 weeks I will not earn my unemployment and will probably screw myself at this time next year when I either won’t qualify at all or will again be offered a reduced benefit. In no possibility did I ever think I wouldn’t have a full time job for last year or this year. I live in MN, with a lower than average UN rate. I guess I am what would be called underemployed. And I am not getting any younger, now in my mid fifties. I can understand why those who are 62 are claiming social security. I would too if I could. I am fortunate that I do not have to survive on my unemployment alone. I thought of a single person, maybe a mother, with no money coming in for one week and a drop of $80 in benefits every week. I imagine some folks wouldn’t eat or pay rent.

  11. @ Barb: Jeez. I hope something comes up in the next two months. Have you looked for jobs outside of teaching? A person who can teach has skills in management and employee training, and the skills developed in dealing with the public can translate into a sales job. Even selling washers & dryers at Sears would be better than limping from substitute teaching gig to substitute teaching gig.

    The federal government is hiring. Look at the site. A lot of the ads are not actually for current openings–basically you’re putting your resume into a pool for jobs that may come open. But nothing ventured, nothing gained. Look for anything you could even remotely begin to do and apply.

    Yes…I had a friend who subsisted for two weeks on nothing but zucchini from her garden. What food she had in the house went to her two small children. She turned the dog loose to scavenge for food out of the neighborhood garbage cans. Just your basic welfare queen! 😉

  12. A few thoughts. First, go ahead and apply for those sections. If you get them, then figure out what to do. If you don’t, at least you’re in the pipeline for another position.

    Second, have you considered doing the payback of soc sec and resetting your clock at 66 rather than at 70? That would give you an immediate boost in income very soon–and you wouldn’t have to pay that much back.

  13. @ frugalscholar: Too late for the Estrella sections; I found out about the paycheck confiscation from the SS bureaucrats an hour before I was supposed to meet with the chair and, rather than waste his time and mine, canceled.

    Yes, I do intend to do the payback next May. The resulting increase in Social Security payments will “outearn” (as it were) 4 percent on the money if it were left in savings and used to pull out retirement drawdowns. They’re not kidding when they say it’s the best annuity going.

    What I’d like to find out is whether you can do this twice. If you’ve done a payback at 66, can you do it again at 70 to really max out payments? If I could do that, then Social Security would pay almost enough to live on, and I could take a much smaller drawdown from savings. Or…take the regular drawdown and run the air-conditioning during the summer.

  14. this seems like a loop hole where the government knows you don’t know the rules and therefore punish you and your family for the lack of clarity they call Social Security.

    • The rule about not earning more than the limit is explained just fine. What’s not so clear is that the consequence is loss of an entire month’s worth of income if you go even one dollar over the limit. When you first see the rules, you think what happens is you get a higher tax bill (because what it amounts to is a 50% tax on every dollar earned over the limit). It would never occur to you that they intend to withold $1,275 because you earned $1 too much.

      Of course you eventually get it back, minus the 50 cents. But until then, you have to find a way to eat and you have to come up with $111 for Medicare Part B.

      If that’s not punitive, I’d sure like to know what it is.

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