Coffee heat rising

Social Security earnings limit

Shafted!

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Remember how those two women at Social Security told me it isn’t true that when you out-earn the poverty-level earnings limitation imposed on those who are forced to take SS payments early, the government takes away an entire month’s benefit check? That instead in the following year Social Security calculates what you owe in tax (it takes back $1 for every $2 you earn over $14,160, effectively a 50% tax), and you are given the option of either having the amount prorated over a number of months and deducted from your benefits in relatively affordable chunks or of sending the government a check to cover the tax?

Well, it turns out they were wrong.

After having told “Roselyn” that I expected to earn $14,900 this year, yesterday afternoon comes a notice in the mail informing me that my September check, which is paid in October, will be withheld, fuck you very much. Any amount that remains after the government calculates and confiscates the tax it thinks it’s owed will be repaid in January.

This will leave me $551 in the hole this month.

Feeling a little skeptical about “Roselyn’s” claim, as you will recall, I telephoned Social Security a second time on September 3, reaching one “Alison.” This CSR confirmed what Roselyn said and reiterated that the government’s procedure is not to take away an entire benefits check when it finds out you will exceed the earnings limitation.

Based on these two assurances, which were repeated several times by each woman during those conversations, I accepted a third course this fall, to run in the second eight-week session of the semester.

The pay for that contract will push my income high enough that Social Security will withhold not one but two benefits checks!

And that will put me $551 in the hole for September and for October or November, whenever they next get around to raping my income.

For God’s sake!

I don’t know what I’m going to do. I can’t get out of the course the chair offered to me and I accepted. Piss these guys off, and they won’t hire you again. So, I’m going to have to eat an $1100 shortfall. I certainly won’t be eating food, since at that rate I can’t pay the utility bills and buy groceries.

There are two choices:

1. Withdraw enough from The Copyeditor’s Desk as dividends to cover the shortfall. Actually, the S-corporation will have to pay me a few hundred bucks as “salary” in December, anyway. A $500 salary amounts to about $600 taken out of the corporate coffers, because as my “employer” CE Desk has to pay its half of FICA and some other taxes. For me as an individual, the net comes to about $375. So to make up a net of $1100, I will have to withdraw about $2,000 from CE Desk, in combined salary and dividends. That’s about half the corporation’s present cash holdings.

or

2. Raid savings set aside for an extreme emergency in which I would not be able to work at all. The emergency savings fund is still in an after-tax bank account, and so no tax consequences would occur if I steal from it.

However, if I get sick or hurt so I can’t work—and we’ve already seen that, as possibilities go, this is not as remote as one might think—then I will have that much less to cover my needs. As it is, emergency savings combined with Social Security would just barely cover expenses for one year. Take $1,100 out of it, and it’ll cover a helluva lot less than that: maybe 10 months.

God. What a mess!

Why did those two women tell me a phony story? Did they lie on purpose? Did they think it was funny to deliberately mislead some old lady and plunge her even deeper into poverty? I’m quite sure of what they said, because I asked both of them to confirm it, and I wrote it down as they were speaking: I have almost verbatim notes of our conversations.

Here’s how this shakes out, projected dollar by projected dollar:

Because the community colleges, like GDU, outsource their payroll to PeopleSoft, paychecks come in at cockamamie times. My second paycheck in October, when the third class kicks in, will only cover one week, and so I won’t have enough to cover my expenses that month, either. Apparently I’ll make it up in November (this assumes they rape me in September, which they’ve announced they’re doing, and then again in October, not in September and November). But meanwhile, between now and the middle of November I have to cope with a shortfall of over $1,000!

While it looks as though I’ll be flush as Croesus in November and December, that extra money has to be saved to cover the month-long winter break, when I’ll have no pay, and the penurious summer, when there’s a good chance I’ll have no teaching income.

{sigh}

What on earth to do?

Probably it would be better to take the $500 annual “salary” from the S-corporation in September or October; this nets about $375. It’s required, but there’s apparently you can pay it to yourself whenever you please.

Defraying the shortfall with a CE Desk “paycheck” would leave $725 to to make up out of savings, but with no tax consequences. That much remains in the S-corporation’s account, and so if a really dire emergency came up, the money would still be there. It’s your basic theft from Peter to pay Paul.

Assuming, though, that nothing awful happens over the next year, because property taxes have dropped a bit, I should be able to use that savings to help replace the $725 raided from the emergency savings fund. If I drop the umbrella on my car & homeowner’s insurance, the two cost reductions combined could be put toward the lost $725.

If the gods smile and I get three sections a semester next year, I should be OK. A summer-session course would guarantee OK.

But it looks like we’re talking just OK here. Short of taking a large drawdown from long-term savings that are still struggling to recover from the crash, we can forget any fantasies about vacations next year. 🙄

On the other hand…it’s a nice opportunity to go back on the half-off diet!

w00t! Murphy’s Law frenzy is over!

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…I hope!

Just talked to one honey-voiced Roselyn at Social Security. About what happens when you commit the crime of earning more than $14,160, she told me an entirely different story from the one I’ve heard from three prior CSRs.

Three people at Social Security—one face-to-face and two over the phone—said that if you earn even a dollar over the prescribed limit, SS stops payment on an entire benefits check. What you owe for your overweening ambition—one dollar for every two dollars you earn—is then subtracted from your benefit that month. But you don’t get the remainder of the benefit check back until the following January. If you over-earn by more than the amount of a single benefit check, then they take two checks away from you. The one I spoke to a month or two ago explained that because your Medicare Part B premium is paid out of your gross benefit, you have to pay that out of pocket, since obviously if you’re not getting your premium check your Medicare B would go unpaid. In other words, not only do you lose the net income from your Social Security check, you also have to beg, borrow, or steal another $111 to pay the Medicare bill!

Well, Roselyn calls bullshit.

She says that is not true at all. When I told her I thought I would earn about $14,900, she said that they would not withhold a month’s benefit check. She said that because of the two for one deal, whatever I would owe would be “not very much.” Furthermore, the fact that I did not work for anyone for two full months this summer counts in my favor. She thinks it’s even possible I will owe nothing.

In any event, says she, you’re not billed for the amount you owe until the following year’s tax returns come in, because the government cannot be certain of what you earned until all your W-2s come in. Once they figure that out, they let you know. You can pay your fine in any of several ways: by simply forking over a check or by having an amount withheld from your benefits check until it’s paid off.

If that’s true…thank you, God!

Of course, there’s no way to be certain that what she says is true. It’s odd that her version would be so radically at odds with what not one, not two, but three other Social Security reps said. And what those three said is different from the variant that you get online: Ehow tells us that if you earn more than $14,160, your benefits will be reduced accordingly throughout the following year. Go to this government site and you get a head-spinning patter of gobbledygook that, to me at least, is utterly incomprehensible: you can work but you can’t and if you do you’ll get more money later and maybe you’ll get some money now and there’s a special rule for if you’re working but also retired and…and…huh? Move on to a government page that tries to explain how they engineer paying off your debt, and you get the explanation that they take half of your overage (i.e., I earn $14,900 in 2010 so have earned $740 over the income limit, so the operative figure is $370) and subtract that from your total year’s Social Security benefit, arriving at a reduced SS benefit. They then divide that by 12 to decide your gross monthly pay.

If that’s accurate, then it would drop my net benefit by $36 a month. More than that, really, because the cost of Medicare will inevitably rise, and with a depression on, you can be sure there won’t be a cost of living increase next year, any more than there was this year.

But as I was speaking with each of the three previous CSRs, I repeatedly asked if even one dollar over the allowed amount meant an entire benefit check would be estopped, and each one assured me that was the case. Each time, I remarked that it didn’t seem fair that a person should lose an entire month’s benefit for earning what I thought at the time would be about $200 over the limit. Each time, the person said, in effect, “Them’s the rules, lady!”

Roselyn told me something else that is directly at odds with what I’ve been told by others and at odds with the language on an official Social Security form. I mentioned that because of PeopleSoft’s lagging pay scheme, GDU paid me in January for work that was done in 2009; that even though my last day was December 31 and I’m on record as having retired on December 31, this payment came in 2010. She said if it was paid in 2010, it would be counted against SS as 2010 income, no matter that my last day on the job was December 31, 2009. Other CSRs have said that money earned in 2009 is counted as 2009 income, and that this also applied to the RASL (unused sick leave pay doled out to state retirees over a three-year period). Thus the $6,800 of RASL paid to me this year would be seen as 2009 income and not counted against my Social Security.

I just downloaded form SSA-131, which contains this language:

Employees are sometimes paid wages in a year subsequent to the year that the wages were earned. The most common types of payments are accumulated vacation pay or sick pay paid after retirement…. Wages which are earned in a year prior to the year the are paid usually do not affect benefits payable under the Social Security annual earnings test.

So, obviously, Roselyn misunderstood this issue. And that makes me doubt everything she says.

Hmmmm….. I’d better jump through another 20 minutes of phone nuisance hoops and call those people back…

• • • • • • • • • •

Hallelujah!

A really knowledgeable-sounding, professional-sounding rep got on the phone this time. She put me on hold while she personally looked up the question to get a definitive answer. And the answer is….

Yes! Roselyn is right!

w00t! Money about to happen?

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So I’m sitting here sweltering through a crush of semester-end stoont papers when what should pop up in the e-mail but a last-minute call for someone to teach a humanities course in the first summer session at a different campus in the community college district. Money happens!

Now at last, folks, we’re talkin’ fair wage: a summer session runs for five weeks; $2,400 for a month and a week of light work comes under the heading of decent pay. Although my Ph.D. is in English, not humanities per se,  my undergraduate degree is in French language and literature. “Humanities” is a vague term that used to mean “classics” but now means almost nothing—as a practical matter, colleges will hire people with almost any degree in the liberal arts to teach these courses. And the beauty of these courses is that assessment can be largely through online tests. Naturally, one would like to assign a term paper or a couple of shorter papers, but they don’t have to be parsed for mechanics and style. People grade these things on the basis of whether the student seems to have responded to the assignment and done the reading, rather than for the student’s writing skill.

Piece. of. cake.

It would push me over the Social Security earnings limit by about $350. More than that, really, because I’ll have to take a “salary” from the S-corporation in December. However, it could be worth it: barring another market crash, I’ll have enough cash to weather a month without the Social Security payment (loss of which is one of the consequences of exceeding the limit).

More to the point, we don’t know that either of the two courses I’m lined up to teach in the fall will make. They’re set up as two eight-week sessions, back-to-back, English 101 first followed by an online feature-writing course. The idea that a freshman comp student will sign up to sit through two three-hour sessions a week verges on the preposterous. And the feature-writing course will follow a nearly identical in-class section a colleague will teach in the first half of the semester.

BTW, if anyone would like to sign up for that feature-writing class (it’s billed as “magazine writing”), it’s 100 percent online, and there’s no out-of-state tuition for online courses. If you’re a blogger, I probably would accept posts that fit the parameters of the assignments—these will include things like a profile, a straight report, an opinion piece, a brite, a how-to, a round-up, or whatever else I can dream up. The course is English 235, Magazine Article Writing; it runs from 10/18 to 12/10/2010. You can register online; from what I can tell, you need to start by getting admitted through this site. There’s a phone number: 602-787-7020.

Anyway, back on topic: I’m less than thrilled at the prospect of working away half the first real summer break I’ve had in 20 years. On the other hand, trying to get through the summer on less than half the income I’ve had this semester is a little scary, plus next fall’s semester will pay $2,400 less than I’ve been earning. The hot season pushes utility and water bills through the roof, and that coincides perfectly with the switch to Medicare, which also will elevate my health coverage bills significantly.

I’m thinking it may be worth having a month’s worth of Social Security taxed at 50%. From what I’m told, the minute the IRS finds out you’re going to exceed the annual earnings limit, they withhold an entire month’s SS benefit. From that they subtract the amount they figure you owe in the tax rip-off—but you don’t get the remainder of the money back until the following January! So the punishment for exceeding the earnings limit is effectively the loss of a full month’s SS income. That’s pretty hefty, when it represents half your net income.

But it may be worth it, to be sure there’s enough to live on over the summer. Maybe.

A little massaging of figures

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Interestingly, I found a table on the Social Security Administration’s site that calculates how much your “full” retirement age SS benefit is reduced according to the number of months you retire “early.” GDU is closing our office and canning me a year and four months before I reach so-called “full” retirement age.

This has caused many hours of worried number-crunching, because you can’t earn more than $14,160 in a  year without incurring a 50% surtax on the amount you earn above that threshold. If you have the temerity to overstep that boundary by a few dollars, Social Security withholds not just the amount you owe, but an entire month’s benefit! (Or more, depending on how gravely you’ve sinned.) You get it back, minus the amounted owed, the following January! That’s assuming, of course, that you haven’t starved to death by then.

It’s a real problem for me, because my savings, formerly adequate to support me in retirement, have been so dessicated by the crash of the Bush-Cheney economy that today a reasonable 4 percent drawdown plus Social Security plus the allowed $14,160 in part-time earnings will not yield enough to support me.

My financial counselor, however, advises me that my savings probably will outlast my lifetime even at a 6 percent drawdown, though he’s not happy at the prospect. On their own, the net of Social Security plus a 6 percent draw would leave my Ultimate Belt-Tightened Budget $5,544 in the red at the end of 2010.

Obviously, I’ll have to teach, do freelance editing, or some combination thereof as long as I’m splitting the cost of the downtown house with M’hijito. When that obligation goes away, I may just barely get by on Social Security and investment income. And of course…I can’t work forever—sooner or later the day will come when I can’t earn anything.

At the Social Security page above, I discovered that in January 2010 I’ll be “entitled” to 91.1% of my “full” retirement benefit. This comes to $16,026, about $2082 more than I’d been figuring.

Well. Every little bit helps.

It also occurred to me that I don’t have to put the $3,168 that I think I’ll net on the $5,280 GDU will owe me for unused vacation time, come next December, directly into savings. Instead, I could use it to live on in 2010.

In 2011, because I reach 66 that year, I’ll be allowed to earn something over $37,000 between January and my birthday in May (capricious as hell, isn’t it? the rules must have been written by a committee of asylum inmates!). This means that in 2010, I don’t have to worry about limiting earned income.

Taking the new Social Security estimate and adding estimated net vacation pay plus a 6 percent investment drawdown, I come up with a somewhat brighter estimate of 2010 income.

Without teaching at all, apparently I would end up only $2,376 in the hole at the end of the year. Since I will probably net about $1,920 for one community college course, this would mean I would have to teach only two sections a year to break even. That assumes that my estimate of the tax bite is correct, and that, at $39,672, I have not grossly underestimated my annual expenses.

However, if I chose to get off my duff and actually work, taking a 6 percent drawdown and applying the vacation pay to 2010 living expenses would provide a pretty generous income, without drawing any Social Security:

Teaching 5 & 5 (for a total of 4 GDU courses and 6 community college courses over a year), an unholy teaching overload, would give me plenty of money to live on in this first, terrifying year of unemployment. Even teaching a more reasonable load of 4 & 4 would provide an adequate cushion, assuming no really major expenses come up. The middle column in this table would have me teaching three sections a semester at GDU, which I think is disallowed—more than two would make you benefits-eligible, which of course is exactly what universities and colleges are trying to avoid by hiring adjunct faculty.

Advantages: It would free me from a lot of bureaucratic complications, and it would allow me to earn as much as I can.

Disadvantage: The massive workload would allow no time for freelancing, and over a year, I would lose my freelance clients.

A far better course load of 3 & 3 at the community colleges, combined with Social Security, vacation pay, and a 6 percent drawdown, also would keep me comfortably in the black. In fact, the result would be significantly better than working myself into an early grave:

Hot dang! In this scenario (if it’s accurate), I actually could bank the $3,168 vacation pay and still get by just fine.

Advantages: Though I still have to work, I don’t have to kill myself at it. The amount left here suggests I will have no problem covering expenditures, even if a large unexpected expense arises. There should still be time for freelance work, and every $2,400 earned there is one composition course I don’t have to teach!

Disadvantage: I’ll have to draw more than is desirable from savings.

Dropping the drawdown to 5 percent would reduce the total annual net to $45,170, cutting the year-end black ink to $5,500. Even at 4 percent, I stay in the black, but with a much smaller margin: about $1,950 at the end of the year.

What I ultimately do depends on what Social Security actually pays me, which will be different from my guesses. They’re missing two years of income that I can prove I had; though it’s not much, it may increase the benefits a little. More likely, though, benefits will be less than I estimate. That’s just the way my karma goes.

It also depends on the tax load: I’m estimating 20% based on the facts that not all your SS is taxed and that I will deduct everything I can think of from all this contract income. With any luck, the taxes won’t bankrupt me—but again, we’re depending on luck, and the way things have gone over the past year, it looks like the luck well is running a bit dry.

The safest course, it appears, will be to take a 5 percent or a 6 percent drawdown in 2010, start Social Security in January, and sign up for three community college sections in the spring semester. Then, in the fall, reduce the teaching load according to the amount freelancing brings in during the spring and early summer. Then in 2010 I can drop the drawdown to 5 percent or maybe even 4 percent, depending on how much freelance income is happening.