If I work, is Social Security taxed?

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Q. When I think about retirement, I’d love to stop working completely, but I’m afraid I won’t have enough money. How is Social Security taxed if I work, and what do I have to plan for?
— Getting there

A. It’s a great question. Taxes aren’t everything, but they are an important consideration so you can see how much money you’ll be left with at the end of the day.

Some people have to pay federal income taxes on the Social Security benefits.

You can receive Social Security retirement benefits and work at the same time, but if you’re younger than full retirement age and make more than the yearly earnings limit, your benefit would be reduced, said Bill Connington of Connington Wealth Management in Fairfield.

Starting with the month you reach full retirement age, Social Security won’t reduce your benefits no matter how much you earn, he said.

“You must pay taxes on your benefits if you file a federal tax return as an `individual’ and your `combined income’ exceeds $25,000,” he said. “If you file a joint return, you must pay taxes if you and your spouse have `combined income’ of more than $32,000.”

If you are married and file a separate return, you probably will have to pay taxes on your benefits, Connington said.

He said Social Security uses the following earnings limits to reduce your benefits: If you are under full retirement age for the entire year, they deduct $1 from your benefit payments for every $2 you earn above the annual limit.

For 2017 that limit is $16,920.

In the year you reach full retirement age, they deduct $1 in benefits for every $3 you earn above a different limit, but they only count earnings before the month you reach your full retirement age, he said.

“If you will reach full retirement age in 2017, the limit on your earnings for the months before full retirement age is $44,880,” Connington said. “Starting with the month you reach full retirement age, you can get your benefits with no limit on your earnings.”

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This post was first published in September 2017.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.