Many seniors choose to work later in life. Retiring early or working longer has an impact on working Seniors and Social Security benefits. Here is an article Beck & Lenox Estate Planning & Elder Law, LLC, came across from nj.com’s that provides some solid information, “If I work past age 70, can my Social Security benefits increase?”
You must pay FICA (Federal Insurance Contribution Act) taxes, commonly called Social Security and Medicare taxes, if you have income that’s covered by Social Security.
The tax is imposed on your earnings up to a maximum amount. For 2021, that maximum amount is $142,800.
Your Social Security benefit at full retirement age (FRA) is determined by taking your highest 35 years of earnings on which Social Security tax has been levied, indexed for inflation.
The maximum amount of your benefit is capped because of the maximum amount of income on which Social Security tax is levied.
If you continue to work while collecting Social Security at any age, your benefit could increase, if your earnings are one of the 35 highest years you have earned.
The increased benefit is automatically calculated by the Social Security Administration and is paid to you in the December of the next year.
However, working while collecting Social Security benefits has other complexities you should consider.
If you’re younger than full retirement age (FRA) and you earn more than a certain amount, your benefit will be reduced.
For example, for 2021, if you’re below your FRA for the whole year, your benefit will be reduced $1 for every $2 you earn over $18,960.
However, the benefit isn’t actually lost. That’s because when you reach your full retirement age, your benefit will increase to reflect the amount withheld.
If you have substantial income — any and all income that must be reported on your tax return — other than your Social Security income, up to 85% of your Social Security income will be taxable.
Financial advisors can advise working Seniors about their Social Security benefits. Estate planning attorneys like Beck & Lenox can help establish the legal documents you need to protect what you may want to leave to loved ones.
Reference: nj.com (July 26, 2021) “If I work past age 70, can my Social Security benefits increase?”