Brain Cramp - Start SS while working tax implications?

[doitmyself]

Old man brain fart going on. Wife (on disability) and I are at about 75% of current tax bracket. If I start Social Security at 66 & 4 months (July) while still working full time, please help me figure out how to calculate if the SS income will throw us into the next tax bracket.

Once I figure out HOW to do this, then I might change the discussion to the implications of getting thrown into the next higher bracket vs. delaying SS. We don't need the $$ now and would probably consider where to stash it, i.e., Roth ???? I know that if I wait until January 2023 and/or age 67, my monthly SS payment goes up about $110.

"Planning" to retire in 2023, maybe 1/24? Plans are waffling due to current personal/world situation. Work still very satisfying, challenging, rewarding, and I have extreme favorable/unique work situation.

THANKS!!!!

 

[JayhawkRoy]

Earnings test calculator towards bottom of page.

Benefits Planner: Retirement | Receiving Benefits While Working | SSA

You can receive Social Security retirement or survivors benefits and work at the same time. However, if you are younger than full retirement age and earn more than certain amounts, your benefits will be reduced.

www.ssa.gov

 

[atikovi]

Unless you need the money now why not wait until 70 and get the maximum benefits. And if work is still very satisfying, challenging, rewarding, and you have extreme favorable/unique work situation, why retire? I always read about the guys that deteriorate quickly and drop dead within 2 years of retiring while the 90 year old who comes in to work every day is sharp as whip.

 

[Passport1]

Very personal decision. Be wary of those who would make it for you. My guiding principle is that time is your most precious asset and you were never guaranteed tomorrow.

 

[doitmyself]

Unless you need the money now why not wait until 70 and get the maximum benefits. And if work is still very satisfying, challenging, rewarding, and you have extreme favorable/unique work situation, why retire? I always read about the guys that deteriorate quickly and drop dead within 2 years of retiring while the 90 year old who comes in to work every day is sharp as whip.

I gave thought to the age 70 thing and my decision based on my circumstances is NOT to wait. Regarding continuing to work, just a few years ago I thought working way beyond 66 was a no brainer. My feelings have changed since then, in spite of some of the greatest work conditions on earth.

Does anyone have assistance to my original question: "please help me figure out how to calculate if the SS income will throw us into the next tax bracket."?????

 

[atikovi]

Ok, I guess you can run the numbers with your current income through tax software and run it again with the addition of SS income.

 

[Gyro Gearloose]

If you don't have a personal tax preparer to pose this question to, one way to get a pretty precise answer would be to get some tax software and pretend your birthday was one year earlier. Just simulate what would have happened if you had started taking SS this past year.

It's been a few years since I went through this on my own taxes, but my experience was that in the most straightforward, simple situation, with income between 32K and 44K, half your SS income will count as income subject to regular FEDERAL income taxes. Your Fed taxes and brackets will be affected as if you got a raise at work for half your SS check. Above 44K of other income, the amount of SS subject to Fed taxes changes to 85% of your check. Again your taxes change as if your work income got raised by 85% of your SS check amount. I haven't looked at income below 32K situations because it didn't apply to what I was doing, but superficially it looked like there are no taxes on SS if you earn less than 32K a year. These are the most simples scenarios. There may be some types of income that are excluded from counting toward the taxable thresholds, I don't know. None applied to me. YMMV.

If SS pay does push you into the next higher Federal bracket, only the $$ over the bracket cutoff is taxed at the higher rate, not the entire amount. If just the idea of being in a higher bracket causes you heartburn, you might be able to lower your income back to the bracket maximum using a before tax IRA, but that is going to be in the "it depends" category, depending on amount and your income.

There are also a series of income cutoffs where your Medicare premiums will go up each month based on your income, but the lowest cutoff is 182K for joint filers. At those income levels the extra premium for the same service would be annoying of course, but not likely a deciding factor on any choices.

This is my best understanding of the rules as they apply to your original question.

 

[JayhawkRoy]

In addition to what Gyro said, here is an article that explains "provisional income", etc that affects the calculation.

Calculating Taxes on Social Security Benefits

The federal government can tax up to 85% of your Social Security benefits, so it's good to know how those taxes are calculated.

www.kiplinger.com

 

[Donald]

Well I believe the max SS you get taxed on is 85% of what they send you in payment.

Take your current income tax forms, find the taxable income after all deductions and add 85% of what you think you will get in SS payments and see where you land.

As you work when collecting SS they will recalculate the SS payment each year as your current salary will replace one of the 30 past years where you likely had lower income. I believe SS counts the 30 years where you had the highest income. If not that exactly it's something close. I often get an adjustment in future payments and a one time adjustment payment.

 

[doitmyself]

Thanks guys! Will take some time to digest this. Also trying to figure out if/why I should have received 3rd. pandemic check .....contacting IRS is nightmare any way attempted (ID.me ridiculousness), LOL.

Good info to get me started. Thank you Gyro Gearloose (and others)
"Above 44K of other income, the amount of SS subject to Fed taxes changes to 85% of your check. Again your taxes change as if your work income got raised by 85% of your SS check amount."
"only the $$ over the bracket cutoff is taxed at the higher rate, not the entire amount. If just the idea of being in a higher bracket causes you heartburn, you might be able to lower your income back to the bracket maximum using a before tax IRA,"