Q&A: How Work Affects Social Security Benefits | Print |  E-mail
Thursday, 02 August 2012 16:06


Special to the Times

Q: I will soon be 66 and at full retirement age. I have the option of continuing to work for my present employer for long as I wish. How would this affect my Social Security retirement benefits?

A: The connection between work and Social Security benefits involves the following considerations:

(1) The Amount of Social Security Benefits — Once you reach your full retirement age of 66, you can work and earn as much as you wish and your Social Security benefits will not be reduced.

However, if you anticipate that your last year of work will be your highest, it might be wise to continue to work at least another year because your benefits at full retirement would then be recalculated and your benefit increased.

Younger individuals who opt to take benefits before full retirement age may see a reduction in benefits based upon earnings. Earnings above $14,640 in a year (2011) result in a reduction of $1 for each $2 of earnings above that ceiling.

By the way, there is some good news for those younger individuals opting for early Social Security and who choose to continue working and thereby incur a reduction in Social Security benefits.

At age 66, there would be a recalculation and at least some of the withheld benefits from the earlier years would be returned to them in the form of increased benefits at full retirement age.

(2) The Taxation of Benefits — If you file your taxes as a single individual and your combined annual income from all sources is between $25,000 and $34,000, then up to 50 percent of your Social Security benefits would be treated as taxable income. If your combined income is more than $34,000, then up to 85 percent of your benefits would be taxable income.

If you file a joint return with your spouse, and together you have combined incomes between $34,000 and $44,000, then up to 50 percent of your Social Security benefits would be taxable income. If your combined incomes exceed $44,000, then up to 85 percent of Social Security benefits is subject to tax.

(3) Enhancing Benefits by Deferring Start Date — If you can manage it, delaying receipt of benefits until age 70 will increase your benefits by approximately one-third over what they would be at age 66, and perhaps more based upon additional work credits earned after age 66.

This decision is really not an easy one and involves considering a number of factors. I suggest that you visit the Social Security website at www.SSA.gov and read “How Work Affects Your Benefits.”

Gene L. Osofsky is an elder law and estate planning attorney in Hayward, visit www.LawyerForSeniors.com.



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