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Tax Implications of Working While Drawing Social Security Thumbnail

Tax Implications of Working While Drawing Social Security

Should you draw Social Security while employed?

You've made it to age 62 or later and you still want to continuing working but you would also like to draw Social Security to add to or supplement your income. Sounds like a great plan and sometime it is a great plan, but be aware the same government that made you pay Social Security is waiting to tax your Social Security.

Here is a Cliff's notes version of how that works if you are employed while drawing Social Security:

If your total income is greater than $25,000 for an individual or $32,000 for a married couple filing jointly, you WILL pay federal income taxes on your Social Security benefits. Below those thresholds, your benefits are not taxed. That applies to spousal benefits, survivor benefits and Social Security Disability Insurance (SSDI) as well as to retirement benefits.

The portion of your benefits subject to taxation varies with income level. You’ll be taxed on:

  • up to 50 percent of your benefits if your income is $25,000 to $34,000 for an individual or $32,000 to $44,000 for a married couple filing jointly.
  • up to 85 percent of your benefits if your income is more than $34,000 (individual) or $44,000 (couple). 

Example: You file individually, have $50,000 in income and get $18,000 a year from Social Security. You would pay taxes on 85 percent of your $18,000 in annual benefits which would  $15,300. You would pay your effect income tax rate on that $15,300. Which for most people would be approximately 10% or $1,500. Of that $18,000 you get from Social Security, $1,500 will be paid in taxes.

You need a plan

A goal of retiring - without a plan - is simply a plan to run out of money. At 80/20 Financial Services our specialty is retirement planning for electric cooperative retirees and retirees in general.

We help our clients increase their income, protect their assets and minimize their taxes.

Contact us for any general questions.

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Brian Coleman-Owner/Advisor

80/20 Financial Services is an Independent Registered Investment Advisor (RIA) registered in the state of Missouri (CRD# 300772). We help clients in Missouri and throughout the United States prosper in retirement. Being independent allows us to work exclusively for YOU.

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