By Angie Moore
The Social Security Administration’s primary job is paying benefits to 59 million beneficiaries, not acting as your financial advisor. The SSA doesn’t know all the variables that affect your decision about filing for benefits; however, the website, SSA.gov, has a lot of information that can help you in your decision-making process.
The Earnings Test shouldn’t keep you from working in retirement. The earnings test may reduce benefits if you are collecting Social Security benefits and earning income at the same time. When you
first receive benefits, if you have earned income and you are older the full retirement age, $1 in benefits is deducted for each $2 you earn above the limit, which for 2014 is $15,480. In the year you reach your full retirement age, this reduction decreases and after you reach your full retirement age, the reduction goes away. The reduction isn’t forever lost. Once you attain your full retirement age, Social Security recalculates and your future benefits are increased to account for the dollars reduced.
Delaying Social Security can make good tax sense. You should carefully consider your 401k and IRA withdrawal strategy in conjunction with your decision to claim Social Security benefits. If you can delay claiming Social Security until your full retirement age (and end up with a larger benefit), your withdrawals from your retirement plan accounts may be smaller, which can result in lower taxable income. Consider this: as much as 85% of a married-filing-joint couple’s Social Security benefits can be taxable, if their income exceeds $44,000. Instead of claiming Social Security at age 62, you
might consider tapping your retirement plan accounts. If you wait to claim Social Security until you’ve reached the full retirement age, you’ll be eligible for larger benefits, and reduce your withdrawals (which may be taxable) from your retirement plan accounts.
Please discuss any Social Security claiming strategies with your trusted advisor.
Angie Moore is a certified public accountant, having been with Kemper CPA for 18 years. She was graduated from the University of Illinois. She and her husband have a 12-year-old son and 9-year-old daughter. They are avid Illini fans.