Social Security and income

[HnkBlz1991]

I would like to collect social security at 62, which will be Sept 2023 for me.  My husband is still working in 2023, but will be retired in 2024.  Would it be beneficial for me to wait until Jan 2024 to collect when our income is reduced?  Will my pension affect taxes on my social security? 

[GuodaL]

Hi HnkBlz1991,

That is a good question. 

If you have funds in a pretax plan, such as a 401(k) or funds in an employer-funded pension, withdrawals you make from these plans after you retire are generally subject to income tax. You can usually have the plan administrator deduct taxes from your distributions — but, depending on your tax bracket, it may not be enough to cover your bill.

Ultimately, your tax rate is based on all your taxable income during the year. If you have multiple sources of retirement income, you'll save on your taxes in retirement if you limit distributions from pretax plans to only the amounts you need or are required to withdraw.

The maximum amount you will pay on your social security income is as follows:

• file a federal tax return as an "individual" and your combined income* is
  • between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
  • more than $34,000, up to 85 percent of your benefits may be taxable.
• file a joint return, and you and your spouse have a combined income* that is
  • between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits.
  • more than $44,000, up to 85 percent of your benefits may be taxable.
• are married and file a separate tax return, you probably will pay taxes on your benefits.

Hope this answers your question. Feel free to reply if you have any additional questions.

[HnkBlz1991]

My pension will put us in the 85 percent taxes on my SS. Is there any way to have the taxes taken out of SS or do I adjust my taxes on my pension?

[HnkBlz1991]

Is a social security payment ever reduces when you earn too much money?

[VolvoGirl]

Yes you can have withholding taken out of your SS or you can increase withholding on something else to cover the tax.  

Yes your SS benefits can be reduced if you make too much.   

If you are over full retirement age your actual ss checks won't be reduced. Otherwise they will actually reduce your payments if you make too much other income in the prior year. See SS FAQ for working after retirement

https://www.ssa.gov/benefits/retirement/planner/whileworking.html

First year special rule
https://faq.ssa.gov/en-US/Topic/article/KA-01927?msclkid=11bc282ccf2211ecb65078152b05ae6b

See page 5 for the special first year rule
https://www.ssa.gov/pubs/EN-05-10069.pdf

[GuodaL]

Hi HnkBlz1991,

That is a good follow up question. When you apply for Social Security Benefit, you can ask them to withhold funds from your benefit to be credited toward your federal taxes. This also applies to your pension. You can also withhold funds from your pension to pay for your taxes.

Please use the tax calculator to figure out how much to withhold.

https://turbotax.intuit.com/tax-tools/calculators/taxcaster/ 

Hope this answers your question. If you have any other question, feel free to reply.