If you go
back to work after collecting benefits, can you avoid paying additional Social
Security taxes?
Jeff Miller • August
29, 2019
Welcome
to “Social Security Q&A.” You ask a Social Security question, our guest
expert provides the answer.
You can
learn how to ask a question of your own below. And if you would like a
personalized report detailing your optimal Social Security claiming
strategy, click here.
Check
it out: It doesn’t cost much and could result in you receiving thousands of
dollars more in benefits over your lifetime.
Today’s
question comes from Rose:
“I have
been on Social Security for years with no other retirement pension. More than
five years ago, I found I had to return to work in order to financially survive
at the age of 69. I work for a nonprofit art museum, but Social Security taxes
still are being withdrawn.
Will I
ever get a raise in my Social Security check while I am able to enjoy it?”
No escape from Uncle Sam
Rose, I
am sorry to report that as long as you continue working, you will never escape
paying Social Security taxes. As you have observed, you will continue paying
Social Security taxes even when you are receiving retirement benefits.
On the
other hand, you can expect to receive increases in your retirement benefits.
Every year, benefits are increased based on the cost-of-living adjustment
(COLA) for the year ending in September.
Some
years, retirees see no rise in benefits. For example, because inflation was low
at the time, there was no adjustment
for 2016. However, there was some good news this year: The increase
for 2019 was 2.8%, the largest
boost since the one for 2012.
The
COLA for 2020 will be announced this fall.
Social
Security sends you a statement each year that shows this adjustment. The
statement also describes any deductions in your check for items such as
Medicare and tax withholding.
Medicare
premiums also always go up each year. For 2019, the premium for most people for
Medicare Part B (which covers medical services and supplies, while Part A
covers hospital services) went up from
$134 to $135.50. (High-income retirees pay a higher premium for
Medicare.) Tax withholding is optional, but is a good way to set aside money so
that you are not hit with a big tax bill when taxes are due.
The reward for working later in life
Since
you have returned to work, there is another factor that could increase your
benefits: Retirement benefits are based on your highest 35 years of earnings,
adjusted for inflation. If your salary now is higher than your earnings in any
one of these previous 35 years or you did not previously work for 35 years,
your benefits will reflect a recalculation and will be adjusted upward.
If you
wish to check on your earnings history, set up an account at My Social Security. In addition to lots of
other information, you will find a table there with your earnings history. The
numbers in this table have not been adjusted for inflation, so they are not the
actual numbers used in the calculation of your benefits.
For
example, when calculating a taxpayer’s benefits, Social Security would multiply
wages earned in 1980 by 4.02. So if that person earned $8,000 in 1980, his or
her wages today would have to exceed $32,160 before today’s wages would replace
the wages in 1980 in the benefit calculation.
Multipliers
for other years can be found at the Social Security Administration
website. Thirty-five years is a pretty long earnings history, so
there may well be a year when today’s earnings are greater than a year in the
past. That means your Social Security check may well go up — although perhaps
only a little — in time for you to enjoy it.
If you
have additional questions about your Social Security payout and how it could
impact retirement, you might want to consider getting some inexpensive
professional help.
https://www.moneytalksnews.com/social-security-qa-can-i-escape-taxes-while-collecting-a-benefit/?utm_campaign=kitchen-gadgets-that-make-healthy-cooking-a-breeze&utm_source=newsletter&utm_medium=email
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