Have you thought about continuing to work and also collecting your social security in your retirement years?
You should be cautious and consult an expert even if you are thinking about working part-time.
The social security income may be lowered if you start to earn too much money while working.
You could also wind up having to pay additional taxes on your social security benefits.
When you decide to retire and if you are at full retirement age, you can get 100 percent of your social security benefits.
The age is dependent upon the year in which you were born.
If you turn 62 sometime in 2018, you can then retire fully at 66 and 4 months and start to receive your social security.
If You Claim Early It Will Reduce Your Benefits
If you decide not to wait until your full retirement age you can claim your benefits early and receive less money each month.
So if you are able to wait until you reach this age or even longer, it could work out better for you.
The monthly income you receive will be reduced by a percentage that is fixed for every month you decide to claim your social security benefits before reaching your full retirement age.
Your income could be close to 1/3 less than waiting until full retirement age.
When you earn too much and also decide to claim your benefits early, the benefit amount can be additionally reduced.
The formula for this year is: If you earn over $16,920 get 1 dollar held back for every 2 dollars that are earned above the limit.
If you are at your full retirement age in the year 2017, then you can make $44,880 – then the benefits will be reduced by 1 dollar for every 3 dollars over the max limit.
This is why it is vital to consult an expert financial advisor to consider all of your options for how long you work and when you should begin collecting your benefits.
It is a good idea to weigh the risks of claiming your benefits early in your specific situation.
The Reason For A Reduced Benefit
The limits will go up a small amount in 2018.
The amount that you earn can go up to $17,040 without having your social security benefits reduced.
For those reaching the full retirement age and claiming their benefits in 2018, they can earn $45,630 and not have their benefits reduced.
Instead of spreading out the reduced amount over the entire year, your monthly benefits will be stopped until the reduction amount is reached, and then they will start to resume again.
The Social Security income will not be sent until the amount is reached, because there is no pro rating.
The remainder of the income will start to arrive every month throughout the year, and any additional money that was held back will be reimbursed to you the next year.
It will not be taken away from you, instead Social Security will add it in your benefit calculation to add to your payment when you reach full retirement age.
What Are The Income Limits When You Reach Full Retirement Age?
The income limit only pertains to you if you have not reached full retirement age and are still working.
If you have reached full retirement age, then you can work as much as you want to and not have to worry about getting reduced benefits.
The limit is for money made from working and not investment income, retirement pensions, etc…
For those that happen to be self-employed, Social Security will use your net income.
How Are Your Benefits Taxed?
If you elect to start getting benefits while you are still working, then you could have to pay additional taxes.
Many of you will not be required to pay taxes on your income, somewhere around 1/3 receiving benefits will have to pay taxes on some or all of the income they make.
Depending on how much you earn, some could have up to 85% of their benefits from Social Security taxed.
This number is figured out from your adjusted gross income.
To find out if your benefits will be taxed, take ½ of expected income with other income and tax exempt interest together.
If this number is greater than 25,000 single or 32,000 married, most likely some of your benefits will be taxable.
If 34,000 single or 44,000 married, you could be in that 85 percent benefits tax bracket.
Some of you will prefer to remain working, whether to get out of the house, because you need the income, or to supplement your benefits.
If you do decide to start receiving your benefits early make sure to speak to a professional to check how, how much you earn will affect your benefits.
If you have questions about your retirement planning or Social Security benefits strategy give us a call today at 410-435-3270.