Should I Work AND Take Social Security?
If you are following our new CommunityAmerica Financial Advisor blogs, one of the concepts we have been discussing is creating different types of income streams for retirement, such as continuing to work while funding a Roth IRA. Social Security is another one of those income streams to consider but it too comes with a lot of potentially confusing rules, especially if you are still earning a paycheck while taking benefits. Here are a few more items to consider if you are taking Social Security and still earning income.
- In 2018, if you work AND collect Social Security at the same time before you turn age 66, the government will withhold $1 in benefits for every $2 in income above $17,040. This income limit goes all the way up to $45,360 if 2018 is the year in which you turn 66. In this case, $1 is withheld in benefits for every $3 you make.
- Once you actually turn 66, there is no limit to how much money you can make and therefore Social Security benefits are no longer withheld. As a bonus, your payments will be increased to reflect any amounts that were withheld in the past (See #1).
- You may or may not be taxed on your Social Security benefits. Take your adjusted gross income from last year's tax return, then add any nontaxable interest income and half of your Social Security benefit. If the total is less than $25,000 ($32,000 on joint tax returns), you owe no income taxes on your Social Security benefits. If the total is between $25,000 and $34,000 ($32,000 and $44,000 on joint returns), you may have to pay taxes on half of your Social Security that's over that threshold. Above that, 85% of your benefits may be taxable—the top rate.
Just in case you were looking for one more reason to consider funding a Roth IRA during semi-retirement, its tax-free income won’t trigger more taxable Social Security income like taking money out of a Traditional IRA could.
Trying to plan the right mix of diversified income streams for retirement can be overwhelming. We are here to help! CommunityAmerica Financial Advisors can assist you with your income planning needs including when to start taking Social Security and how those benefits might be affected by continuing to work.
Rance Carlson is a CERTIFIED FINANCIAL PLANNER™ with CommunityAmerica Financial Solutions and works primarily out of the Green Hills Financial Planning Center. To get in touch with Rance or an advisor near you, click the button below.