Sociial Security

[dd9253]

I hit full retirement age Jyly 2022 andam still working full time. I intend to work another 3 years and my earnings should improve my 35 years of earnigns. Should I start taking my benefit this Dec or wait until Jan 2023. I intend on using 1/3 of this benefit to icrease my IRA

[xmasbaby0]

TAX ON SOCIAL SECURITY

Up to 85% of your Social Security benefits can be taxable on your federal tax return.  There is no age limit for having to pay taxes on Social Security benefits if you have other sources of income along with the SS benefits.  When you have other income such as earnings from continuing to work, investment income, pensions, etc. up to 85% of your SS can be taxable. 

 What confuses people about this is that before you reach full retirement age, if you continue working while drawing SS, your benefits can be reduced if you earn over a certain limit. (For 2019 it was $17,640— for 2020 it was $18,240; for 2021 it was  $18,960.  For 2022 it was  $19,560  —  for 2023 $21,240

After full retirement age, no matter how much you continue to earn, your benefits are not reduced by your earnings; your employer will still have to withhold for Social Security and Medicare.

To see how much of your Social Security was taxable, look at lines 6a and 6b of your 2021 Form 1040

https://ttlc.intuit.com/questions/1899144-is-my-social-security-income-taxable

https://www.irs.gov/help/ita/are-my-social-security-or-railroad-retirement-tier-i-benefits-taxable

You need to file a federal return if half your Social Security plus your other income is $25,000 when filing single or head of household, or $32,000 when filing married filing jointly, $0 if you are filing married filing separately.

Some additional information:  There are 13 states that tax Social Security—Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia.  These states offer varying degrees of income exemptions, but four mirror the federal tax schedule: MN, ND,VT, and WV

[KochuK]

Hi dd9253, thank you for attending the event and posting questions.

Congrats on reaching the Social Security full retirement age in July 2022.

You have until April 18, 2023 to contribute to your traditional IRA for tax year 2022. Therefore, it does not matter if you take social security retirement in Dec 2022 or Jan 2023.

Also, your monthly retirement benefit will be higher if you delay starting it.

https://www.ssa.gov/pubs/EN-05-10147.pdf 

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Your benefits may increase when you work:

As long as you continue to work, even if you are receiving benefits, you will continue to pay Social Security taxes on your earnings. However, we will check your record every year to see whether the additional earnings you had will increase your monthly benefit. If there is an increase, we will send you a letter telling you of your new benefit amount.

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https://faq.ssa.gov/en-us/Topic/article/KA-01921 

Hope the above helps. Thank you.