For those of you that are at retirement age, but are still working, there are some facts you need to be aware of and understand regarding Social Security benefits.
Are you aware of what age you need to be to reach your full retirement age (FRA)? Your FRA is based on the year you were born, which you can figure out by using a retirement calculator.
For those of you that have not reached your FRA yet, if you make above the annual income limit, your Social Security benefit amount may be less due to your current income.
For those of you that are receiving Social Security and are still working, the income limits are not liable if you are at least full retirement age. In other words, the Social Security Administration cannot deduct your benefits based on your earnings once you reach full retirement age.
However, you may still be liable for federal income taxes on your Social Security payments. This will be based on your provisional income, which is calculated with how much you earn from other streams of income and 50% of your Social Security earnings. Single filers that have a provisional income of $25,000 or less will not be liable to federal once tax. For those that will be filing jointly, you will not be subject to taxes on your benefits if you bring in $32,000 or less a year.
Your payment will be recalculated each year, utilizing any new income that shows up in the system.
For single filers that have a provisional income from $25,000 to $34,000, up to 50% of your Social Security payments will be subject to taxes. For joint filers, the numbers are $32,000 to $44,000.
For those that make over these limits, up to 85% of your benefits will be taxable.
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One method to avoid a lot of headaches when it comes to these taxes is to consider opting for tax withholding in your Social Security payments.
Keep an eye out for a raise in payment amounts around the latter part of the year. As mentioned earlier, the Administration recalculated your benefits every year using any new income information in the system.
If your new data of income is within the period of your 35 highest-earning years in your working career, you will typically get a small bump in your benefits. Keep in mind that these raises are not related to the cost of living adjustments done in January of the following year.
If married, your significant other can also receive a raise in their benefits as well.
For those that are able, you may want to consider continuing to work. Though retirement deferral credits stop at 70, you would still be increasing your benefit amount, which continues in your payments until your death.