Wednesday, November 8, 2017

Preparing to retire into an RV part 3: Money and Social Security

How much money are we gonna need each month to live in our RV? Where is the money going to come from? Well, the main source of income is going to come from our social security. Even though we are retiring early you can start to collect your social security benefits at age 62. You can apply for your benefits at age 61 and 9 months old. Both my wife and I will be collecting our social security benefits each month which gives us a nice steady income. Will it be enough to cover the expenses of what we want to do? You are allowed to supplement your income with work and earn up to $16920 a year each without penalty.
Only actual wages earned are counted. Unearned income does not count against your social security retirement benefits. So we could do some odd work here and there as we travel. Perhaps run a small eBay business from our RV. Other sources of income will be coming from affiliate links.
We won't have the expense of a mortgage anymore along with associated bills for it.Still do have a truck payment and a trailer payment though. It still ends up being less than a mortgage payment and no utilities. In 2017 income earned prior to your 62nd birthday is not counted against your benefits.
Beginning in 2018 any income you receive that year prior to your 62nd birthday is counted against your annual allowable earned income. Any earned income over $16920 reduces your benefit by $1 for every $2 earned.Earned income is income derived from a job or self-employment. Unearned income is things like investments, withdrawals from 401k’s, and interest income.So if you earned 26920 from a job for the year it would reduce your benefits  $5000.Even if that happens you really don't lose that money. Because it may increase your monthly payments later when you reach full retirement age.Even though you're getting reduced benefits because you retired early I feel that it's still worth it over the long haul because you're not giving up that much.I calculated the difference in income from early retirement and full retirement age over a 20 year period, And it only amounted to a $12000 difference for me.So I might as well take the early retirement and if we choose to work here and there and end up making more money than we are supposed to you still don't lose any benefits overall.
You can make as much unearned income as you want it will not affect your benefits.  But of course, you may increase your tax obligations.
My plan is to keep our income in the 15% Federal tax bracket. There is a huge jump when you go over. The next bracket is 25%. We, unfortunately, don’t know what the 2018 tax brackets will look like. When the tax laws change I will adjust our income targets.
We are banking on selling our house and paying off debt. If we do that, our cost of living will be rather small. The freedom of being debt free will certainly reduce a lot of stress. Who knows, maybe we will live longer as well. Our quality of life will definitely improve. To be able to travel as we wish will be a wonderful feeling, I'm sure.
The downsizing has begun. Next item to research is Health insurance. That’s for another article, till then, Happy Camping!

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