Working in Retirement - The Impact to Your Social Security

KALAMAZOO, Mich. - April 22, 2015 - PRLog -- Looking at something from a new angle usually offers a different perspective. The street view of your house, for example, is different from the aerial view. It’s the same with Social Security.

If you decide to work after you retire, be sure to look at your Social Security benefits from every angle. That way, you have the right perspective to make smart decisions about your benefits.

Your Earnings May Reduce Your Social Security Income

People who work in retirement may receive a reduced Social Security benefit if they take their benefits early. Two factors work hand-in-hand to determine whether you will receive a full or reduced benefit:

Your earnings – Earnings consist of wages and self-employment income. Unearned income (such as interest and dividends) is generally not included.

Your age – The Social Security Administration considers your full retirement age (FRA) as the age at which you can receive 100% of your benefit amount.

Taking Social Security before your FRA will permanently reduce your benefit. And if your earned income is above certain limits, you may see an additional reduction. Once you reach FRA, however, there is no adjustment in benefits regardless of how much you earn.

Your Social Security Benefits May Be Taxed

Regardless of when you start taking Social Security, if your combined income is at a certain level, your benefits could be subject to income tax. Generally, your combined income is the sum of your adjusted gross income plus tax-exempt interest plus one-half of your Social Security benefits.

Many people expect to pay taxes on their salaries but may be surprised to learn that their Social Security benefits could be taxed if their combined income falls above certain limits. Knowing how this works, however, allows you to consider all potential taxes and better estimate your after-tax income.

Your Edward Jones financial advisor can help you develop a retirement income strategy. If you plan to continue working either full or part time, be sure to discuss the potential impact on your Social Security benefits with your financial advisor and tax professional.

Edward Jones, its employees and financial advisors cannot provide tax or legal advice. This information is a summarization and should not be depended upon for other than broadly informational purposes. Please consult your attorney or qualified tax advisor regarding your situation.

This information is believed to be reliable, but investors should rely on information from the Social Security Administration before making a decision on when to take Social Security benefits. It is general information and not meant to cover all scenarios. Your situation may be different, so be sure to discuss this with the Social Security Administration prior to taking benefits.

Source: Congressional Budget Office, Social Security Administration.