Q. If I keep working past my retirement age of 66, can I collect Social Security and a full-time pay check at the same time?
— Getting closer
You are able to collect Social Security while you are still working.
But there are reasons to consider holding off on taking benefits if you don’t really need the money.
Social Security will not reduce the amount of your benefit when you attain full retirement age (FRA) and continue working, but deductions are made for those who file prior to FRA and exceed the income limits, said Claudia Mott, a certified financial planner with Epona Financial Solutions in Basking Ridge.
She said if your income is providing enough for you to cover your expenses, you may want to delay filing until you fully retire or perhaps reduce the number of hours you are working.
“For each full year you delay taking Social Security, until age 70, when you must begin receiving payments, your benefit amount will grow by 8%,” Mott said. “Additionally, if your income is continuing to rise while you are working, your benefit is likely to increase as it will be based on the 35 years in which you earned the most.”
Income taxes are another consideration in terms of the timing of filing for benefits and you want to weigh the impact of this on the overall payments you’ll be receiving, Mott said. The IRS will tax between 50% and 85% of your benefit if you earn more than $25,000 as an individual or $32,000 as a married couple. This is based on Modified Adjusted Gross Income or (MAGI) which includes your earnings, a percentage of your Social Security and nontaxable interest, she said.
One last consideration is the impact of your Social Security income on your total earnings as it relates to Medicare premiums and IRMAA (Income Related Monthly Adjustment Amount).
“Premiums for Part B medical insurance and Part D for prescriptions can be assessed an extra charge if MAGI exceeds certain income limits,” Mott said. “There is a two-year look back on the tax return data that is used, so 2020 premium surcharges are based on 2018 reported income.”
For an individual or those who are married but file separately, surcharges begin at $87,000, while a married couple with income over $174,000 will incur an additional premium, she said.
She recommends you talk to a tax professional to get a better understanding of how your Social Security benefit is going to impact your earnings and tax pictures.
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