How much will I lose in Social Security payments if I file now at 68 1/2

[AngeliqueD]

I would like to start receiving Social Security checks now but am still working.  I am 68 1/2.  Is there a significant difference in the amount I will receive versus filing at 70?  Are there states where Social Security income is not taxable?  Not sure I want to wait any longer.. would like to take advantage of having (2) checks coming in, maybe investing the additional income.  Thoughts?

[shamit · Accepted solution]

According to the Social Security website you would lose 2/3 of a percent for every month.  Which come out to about 12% for a year and a half.  Another consideration is that if you take your Social Security while still working there is a very good chance that a portion of your Social Security will be taxable on your Federal Tax return.  My husband worked for a year after reaching 70 and that caused 85% of his Social Security and mine (since we file a joint return) to be federally taxed.

[GailL1 · Accepted solution]

Once you have reached your FULL RETIREMENT AGE (FRA) which you have, you can work and earn as much as you want and your full benefit amount is NOT reduced. 

In fact, if you continue to work, you and you’re employer will still be paying payroll taxes so it could be that your benefit will get bigger annually once those earnings are booked by the Social Security Administration.

Once you have gone over your FRA and haven’t filed for benefits, your benefits will grow at a rate of about 8% a years between FRA and age 70; these credits are known as DELAYED RETIREMENT CREDITS (DRC).   At 70 years old your  benefits stop earning anything so don’t wait any longer than 70 years old to begin getting them.

You can, of course, get your full benefits sooner than 70 - At 68 1/2 the only thing that you will be losing is a bit of those delayed retirement credits - like about 12% ( 8% + 4% ) 

There are sone states that tax or don’t tax Social Security benefits - you will have to check on what your state does.

There is a Federal tax on some of your benefit amount if your total income goes over a certain amount. There is a worksheet that goes with your Federal income tax calculations to see if any of your benefits are taxable.  This tax is NOT an income tax, it is an additional Social Security tax to help the finances of the SS program.    Perhaps think of it as paying tax on the employers part of SS which is compensation for you but never taxed while working - not by you and not by the employer.

You most definitely can begin your benefits - 

Have you signed up for Medicare already?

[GailL1 · Accepted solution]

Once you have reached your FULL RETIREMENT AGE (FRA) which you have, you can work and earn as much as you want and your full benefit amount is NOT reduced. 

In fact, if you continue to work, you and you’re employer will still be paying payroll taxes so it could be that your benefit will get bigger annually once those earnings are booked by the Social Security Administration.

Once you have gone over your FRA and haven’t filed for benefits, your benefits will grow at a rate of about 8% a years between FRA and age 70; these credits are known as DELAYED RETIREMENT CREDITS (DRC).   At 70 years old your  benefits stop earning anything so don’t wait any longer than 70 years old to begin getting them.

You can, of course, get your full benefits sooner than 70 - At 68 1/2 the only thing that you will be losing is a bit of those delayed retirement credits - like about 12% ( 8% + 4% ) 

There are sone states that tax or don’t tax Social Security benefits - you will have to check on what your state does.

There is a Federal tax on some of your benefit amount if your total income goes over a certain amount. There is a worksheet that goes with your Federal income tax calculations to see if any of your benefits are taxable.  This tax is NOT an income tax, it is an additional Social Security tax to help the finances of the SS program.    Perhaps think of it as paying tax on the employers part of SS which is compensation for you but never taxed while working - not by you and not by the employer.

You most definitely can begin your benefits - 

Have you signed up for Medicare already?

[AngeliqueD]

Thank you, thank you!  😀  I have not signed up for Medicare yet because I am covered under by company's Group Health Insurance.  Should I?

[shamit · Accepted solution]

According to the Social Security website you would lose 2/3 of a percent for every month.  Which come out to about 12% for a year and a half.  Another consideration is that if you take your Social Security while still working there is a very good chance that a portion of your Social Security will be taxable on your Federal Tax return.  My husband worked for a year after reaching 70 and that caused 85% of his Social Security and mine (since we file a joint return) to be federally taxed.

[AngeliqueD · Accepted solution]

Thank you @shamit .. I am concerned about the taxes.  I will consult with a tax accountant.