Q: If you continue working while taking Social Security benefits, do you continue paying the SS tax?
A: Everyone employed in a Social Security-covered job pays FICA taxes, and yes, even if they are already receiving benefits. However, the good news is that some people who keep working after collecting SS benefits continue to update their earnings record. This improved earnings record could result in higher benefits, and so annually the benefit you receive will be adjusted.
Q: Can spousal benefits be reduced by the earnings test?
A: Yes, spousal benefits and survivor benefits are subjected to the earnings test. Most people forget this. If you pull this type of auxiliary benefit before full retirement age (FRA), the earnings test could reduce the actual benefit if you exceed the annual limit. However, when you do reach FRA, the amount of benefits withheld will be automatically recomputed to remove the actuarial reduction from those withheld months. So the good news is that the benefit will increase by the amounts withheld, before adding in the cost of living adjustments (COLA).
Q: Are COLA increases higher the longer I wait to collect my benefits?
A: Actually, I think this question is asking if the benefit is raised by annual COLA even if the person hasn’t started receiving them yet. The answer is yes. Of course, there is no way of knowing what the adjustment will be year over year, but rest assured – unclaimed benefits will earn COLA’s for every
Q: Is it true that my benefits will be reduced or stop completely if I try to work, and receive benefits at the same time?
A: This is a great question, and one that needs a two-part answer. First, keep in mind that SS benefits are based on the highest 35 years of earnings. Thus, working longer (even part time) can replace lower or zero earnings years, adjusting the SS benefit upward. And by improving your earnings record, working longer will increase your SS benefit, which is a great investment in future income! This is important to remember when addressing the second part of the answer: Yes, there is an earnings test. If you apply for SS benefits before FRA, and still work, $1 in benefits will be withheld for every $2 you receive in earned income over $15,720 in 2015. If you apply for SS benefits the year you turn FRA, and make more than $41,880 in the months before you reach FRA, $1 in benefits will be withheld for every $3 you receive in earned income. However, there is no earnings limit starting the month you reach your full retirement age – so working and receiving earned income is not a problem.
If you have questions on these or other financial planning matters, feel free to call The Kelly Group at 410-893-0560. I95
The Kelly Group
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