Even when seniors retire, some find opportunities that can generate extra income. The Motley Fool notes two ways that result in reduced Social Security benefits if the income gets too high.
If you start collecting Social Security before reaching your Full Retirement Age (FRA), you are subject to a penalty for every dollar earned above a certain limit. If you don’t reach your FRA in 2022, you could lose $1 in benefits for every $2 earned about a limit of $19,500. Should you reach FRA in 2022, things change. You could forfeit $1 in benefits for every $3 earned above $51,960.
Another pitfall is how Social Security benefits are subjected to taxes at the federal and state levels. State rules can vary greatly depending on where you live, however, federal rules are very clear.
The IRS also considers what it calls provisional income. This includes half of your Social Security benefit plus all taxable and some taxable income exceeding $25,000 for an individual and $32,000 for a couple filing jointly. The more you earn, the higher the percentage taxed.
About half of all seniors wind up with taxed benefits, and for higher earners, the benefits could be taxed at 85 percent.
Council of Seniors Knows Every Dollar Counts in Retirement
Here at Council of Seniors, we’re pushing Congress to pass The SAVE Benefits Act. This bill is needed to make up for Social Security cost of living adjustments (COLAs) that haven’t kept pace with inflation in recent years. The missing $581 that’s belonged to seniors along will finally be paid if it passes.
Sign our petition today to show politicians you support this bill.
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