I’ve had several clients call me with concerns about working while still receiving their Social Security benefits.
There are two issues that seem to get confused and tie everyone into knots. The first is how much you can work while you are receiving Social Security, and the second is how much of your Social Security will be taxed.
If you are receiving Social Security, but still earning other income, some of your Social Security payments may be reduced. This only happens when you have elected to start your Social Security early, or before full retirement age.
The amount of income you can earn before a reduction kicks in depends on your age. That’s why the answer may be different for you and your neighbor. Here is a a pretty good article explaining how it works.
The second issue is how much of your Social Security income will be taxable. The taxation of your Social Security is based on your total income for the year, which includes how much your spouse makes. I think it helps to think of the extremes. Imagine someone whose only income in retirement is Social Security. That person will have no tax liability, his Social Security is not taxable. But now think of someone who is retired but has a huge investment portfolio and is earning $100,000 a year in interest and dividends. Eighty-five percent (85%) of that person’s Social Security will be taxable. The logic is that Social Security is supposed to be part of the social safety net, and someone still making a lot of money in retirement doesn’t need that safety net.
Here’s another article that I’ve been hanging onto just because I think it explains things pretty well.
Ok! Hope this is useful.