PART 2 – 12 Things You Need to Know About Social Security
This article is Part 2 of an article we sent in March. You can review Part 1 here.

7. Can You Work and Claim Social Security Benefits?
If you’ve already reached full retirement age, feel free to work away if you choose. Your benefits won’t be affected no matter how much you earn.

But if you take Social Security early, your benefits will be reduced by $1 for every $2 you earn above $19,560 in 2022. You get more leeway during the year you reach full retirement age: You’ll have $1 withheld for every $3 you earn above $51,960, and then once you actually hit that age, your benefits will no longer be reduced.

8. Are Social Security Benefits Taxed?
If you have additional income, whether it’s from a job or investments, there’s a good chance at least part of your Social Security will be taxed. Here’s how it breaks down.

If you’re a single filer:
  • 0% of your benefit is taxable if your income is below $25,000.
  • Up to 50% of your benefit is taxable if your income is between $25,000 and $34,000.
  • Up to 85% of your benefit is taxable if your income is above $34,000.

If you’re married filing jointly:
  • 0% of your benefit is taxable if your combined incomes are below $32,000.
  • 50% of your benefit is taxable if your combined incomes are between $32,000 and $44,000.
  • 85% of your benefit is taxable if your combined incomes are above $44,000.

Keep in mind that “taxable” doesn’t mean that’s what you pay in tax. Suppose you’re a single filer with $30,000 of income: $20,000 from Social Security benefits and $10,000 from 401(k) withdrawals.

That simply means that your income will be $20,000 in the eyes of the IRS: $10,000 from the 401(k), plus 50% of the $20,000 from your Social Security benefits. Uncle Sam can’t touch the remaining 50%.

By forgoing the tax break during your working years, you get tax-free income in your retirement years — income that doesn’t count against you for Social Security purposes.

In the example above, if the $10,000 of 401(k) income had come from a Roth IRA instead, your income would be $0 in the eyes of the IRS. The $10,000 wouldn’t count against you, meaning that you’d fall below the $25,000 income threshold. That means 0% of your Social Security benefit would be taxable.

If Social Security is your only income source, you probably won’t be taxed on it, considering that the average benefit amounts to just $19,884 per year.

9. What’s the Best Age to Take Social Security? There’s no perfect age to take Social Security. And unfortunately, a lot of people don’t have the option to delay benefits because they’re forced to retire early due to health concerns, a job loss or the need to care for a spouse or parent.

Obviously, if you want bigger monthly checks, you’d wait as long as possible. If you want more checks over the course of your lifetime and were OK with them being smaller, you’d claim earlier.

If you have medical issues or your parents died relatively young, it’s worth considering starting benefits earlier. You’d wait as long as possible if you’re in good health, especially if you’re worried about outliving your money.

Sometimes spouses try to maximize their benefits by having the higher earner wait as long as possible while the lower earner claims at 62. Once the higher-earning spouse starts collecting, the lower earner switches over from their benefit and starts collecting half of the higher earner’s benefit.

10. Can You Get Social Security if You Haven’t Worked?
You can still get Social Security retirement benefits based on a current, former or deceased spouse’s record even if you’ve never worked. Otherwise, you’ll need to pay into the system to collect benefits.

Children of a deceased worker qualify for survivors benefits until they’re 18 or 19 if they’re still enrolled in high school full time. If the child is over 18 but has a disability that began before age 22, they can also qualify for survivors’ benefits.

11. How Do You Apply for Social Security? You can easily apply for Social Security online in about 15 minutes. Local Social Security offices have been closed due to COVID-19, but if you have a question, you can call 800-772-1213 between 8 a.m. and 7 p.m. Monday through Friday.

12. Can You Reverse Your Decision to Start Benefits?
Yes, but your options for reversing your Social Security decision are extremely limited: If it’s been less than a year since you started benefits, you can withdraw your application and repay all your benefits, including Medicare premiums, taxes you opted to withhold and benefits your family received on your behalf.

If you’ve reached full retirement age, you can suspend your benefits so that you can take advantage of the extra 8% Social Security gives you for every year you delay beyond your full retirement age. Once you hit 70, your benefits will automatically restart.

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