Current Pension Topics

Early Social Security to Cost

By JOEL L. FRANK

Q.: I will be 62 next month and plan to take Social Security at that time. So far I have earned $21,000 for 2006. Will this negatively impact my Social Security for 2006?

J.D.

A.: Yes it will. If you are younger than your full retirement age during all of 2006, Social Security will deduct $1 from your benefits for each $2 you earn above $12,480. Here is the link that will give you a more complete understanding of the topic: www.ssa.gov/pubs/10069.html

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Q.: You have covered how to calculate the final average salary for Tier III/IV in several columns, but in your examples, the salaries always go up year after year. My situation is different: for a couple of years I earned significant overtime, and I am not sure how to calculate the amounts. Would you please use the following salaries: Year 1: $86,000, Year 2: $98,000, Year 3: $96,000, Year 4: 4 88,000 Year 5: $89,000.

K.W.

A.: Final Average Salary (FAS) is defined as the greater of the average annual salary earned during any three consecutive years of service or the average annual salary earned during the last 36 months of service. The salaries earned in years 2, 3 and 4 are your highest three consecutive years, so we will use them because each of them is not more than 110 percent (1.1) of the average salary earned during the previous two years. In other words, in order to use $98,000, it must be less than 110 percent of the average of $96,000 and $88,000, which is $92,000. 110 percent of $92,000 is $101,200, which is more than $98,000. In order to use $96,000, it must be less than 110 percent of the average of $88,000 and $89,000, which is $88,500. 110 percent of $88,500 is $97,350, which is more than $96,000. And in order to use $88,000 we will assume that it is less than 110 percent of the average of year 5 and year 6 even though you did not give us the salary earned in year 6. Your FAS is: $94,000 ($98,000 + 96,000 + 88,000 = $282,000 divided by 3)

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Q.: I am a 25-year-old teacher. Based on NYSUT's endorsement, I started to contribute to the 403(b) ING Variable Annuity last year. Thanks to Eliot Spitzer, I now realize it is a bad deal. I have stopped contributing and would like to take out some (if not all) of the money for wedding purposes. What steps are involved?

J.K.

A.: The earliest date upon which you can make a withdrawal from a 403(b) is: attainment of age 59-1/2, separation from service, financial hardship, disability or death. Did NYSUT/ING inform you of these restrictions before you signed up for salary reduction contributions to your 403b account?

Mr. Frank is a fee-only Retirement Financial Planner. He can be reached by telephone at (732) 536-9472, by fax at (732) 536-7373, or via e-mail at rollover@optonline.net.