Everyone must make applicable Social Security contributions on income, even those working past the full retirement age. Working past full retirement age may increase Social Security benefits in the future because Social Security contributions continue to be paid in. Continuing to work, however, may lower current benefit payments, if any, taken during the year full retirement age is reached, according to a Social Security Administration limit, which changes every year. If full retirement age is reached in July, for instance, the total income earned from January to July must be below the limit or Social Security benefits are lowered by $1 for every $3 of income over the limit, which is $46,920 for 2019. That money is held by the Social Security Administration and repaid incrementally once the taxpayer is no longer working. There are no limits on income earned past the month that full retirement age is reached when the full benefit amount is paid no matter how much income is earned.
However, taking Social Security benefits while continuing to work may have the unexpected negative consequence of bumping a taxpayer into a higher tax bracket. Most people forget that a certain percentage of Social Security benefits may be taxed – up to 85% – depending on filing status and combined income, including half of Social Security benefits. Some states also tax Social Security benefits. It is possible to have taxes withheld from Social Security benefit payments by filling out IRS Form W-4V or requesting a Voluntary Withholding Request Form online.
Steve Stanganelli, CFP®, CRPC®, AEP®, CCFS
Clear View Wealth Advisors, LLC, Amesbury, MA
If you are still working, whether in a self-employed capacity or for an employer, then the answer is a simple yes. As long as you are working and earning an income, then you will be required to contribute to Social Security.
Whether or not you need to pay taxes on your Social Security benefits however, depends on your modified adjusted gross income (MAGI). If your MAGI is above a certain threshold for your filing status (e.g. single or married filing jointly), then your benefits would be taxable. Up to 85% of a taxpayer’s Social Security benefits are taxable.