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6 Most Common Questions on the Social Security Income Limit

social security earnings limit

When filing for Social Security before your full retirement age, it is imperative that you understand how the income limit works. Don’t miss this! You’ll receive an overpayment notice if you fail to adhere to these rules, and it may result in your benefits being terminated. 

This is one of the topics that I’m asked about all the time. When it comes up, I’ve noticed that most people have the same questions. 

They are: 

  • Why do we have an income limit? 
  • How much can I earn? 
  • What happens to withheld benefits? 
  • Is the income limit based on single or joint income? 
  • What if I retire during the year (after exceeding the annual limit)? 
  • What income counts towards the Social Security income limit?

Today, I’ll give you the answer to each of these questions. When you finish reading this, you’ll no longer find this topic to be a mystifying no-man’s land waiting to trip you up. 

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3 Must-Know Facts About Taxes on Social Security Benefits

As a retiree, it’s important to plan for all costs that you’ll incur — including taxes. Unfortunately, it comes as a surprise to many seniors that the federal government and some state governments tax Social Security benefits. 

Whether you’re currently receiving Social Security checks or plan to in the future, there are three key rules you should know so you’re prepared for the impact that your tax bill will have on your retirement budget. 

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How Social Security Benefits Are Gradually Shrinking

how social security benefits are shrinking

For a majority of recipeints, Social Security benefits are shrinking.

This isn’t due to a new rule that has made it under the radar, this is actually a nearly 40 year old law that is finally starting to have the effect the creators knew it would. And it’s only going to get worse.

If you are planning for your retirement, I want you to stop what you’re doing for the next few minutes and pay CLOSE attention because I don’t want this to sneak up on you as a big surprise once you retire.

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Can You Claim Social Security Spousal Benefits After a Divorce?

Many people who claim Social Security receive retirement benefits equal to a percentage of income earned over their career. But that’s not always the best choice. In some cases, you may be better off opting for spousal benefits instead if your husband or wife earned more money than you did. 

Spousal benefits are worth up to 50% of the standard benefit your partner is entitled to at full retirement age. When your partner was the higher earner, this may be more than your own benefits would be. And if you didn’t work enough to become eligible for retirement checks, spousal benefits may be your only source of Social Security income later in life. 

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4 Things to Know About Claiming Social Security Early

Social Security checks are a vital income source for many older Americans, and seniors are often eager to start them. But while retirees have the option to file for benefits between age 62 and 70, claiming early can reduce the amount of each payment. 

Starting benefits “early” means getting your first check any time before full retirement age, which is between 66 and four months and 67 depending on birth year. While many people opt to begin their benefits prior to FRA, it’s important to understand four major consequences of that choice. 

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How Much Social Security Is Taxable?

how much social security is taxable

If you are planning to retire, it’s important to take into account all costs you will incur – including how much Social Security is taxable. 

Taxes from Social Security are a surprise to many retirees who are unaware of the factors that determine whether your monthly benefit will be taxable. 

Fortunately, it is not hard to understand how much Social Security is taxable.   

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How To Reduce Taxes on Social Security

how to reduce taxes on Social Security

For many retirees, the taxable income generated by their Social Security benefits is a shock. Now they are wondering how to reduce taxes on Social Security.

Although they were aware that some of their benefits would be taxable, they were not aware of the complexity in determining the percentage that would be taxable.

Thankfully, there are a few moves that can reduce taxes on Social Security. 

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The Average Retiree Gets This Percent of Retirement Income from Social Security

Wondering how much income you’ll get from Social Security when you retire? You might be surprised to discover that the average retiree receives one-third of their total income from Social Security, according to the Social Security Administration

In other words, 33% of retirement income comes from Social Security, and the remaining 67% comes from other sources, like pensions and retirement savings. 

While 33% is a significant amount, the statistic includes people who depend on Social Security for 100% of their retirement income and people who have so much money that they don’t notice the monthly Social Security deposits. 

The often quoted 33% might be an arithmetic average, but one thing is sure — it isn’t the norm for most people.

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Social Security Benefits can be Recalculated: Find Out How and When

Recalculation of Social Security

The recalculation of Social Security benefits is not unusual. There are a variety of circumstances which can trigger a recalculation so it’s important to know when and how your benefit can change if this happens to you. 

Recalculation vs. Recomputation

Before we get too far, let’s clear up some of the terminology. There are actually two terms that sound a lot alike, but they have different meanings. After all, we are dealing with Social Security rules here and terms that we use synonymously in everyday language don’t always have the same meaning with the SSA. 

These two terms are recalculation and recomputation. 

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The Social Security 2100 Act: 14 Things That Will Change

14 changes from the Social Security 2100 Act

The Social Security 2100 Act has been reintroduced after undergoing a few structural changes in an effort to make it more acceptable to both Democrats and Republicans. If you want to keep up with the changes to Social Security, watch this carefully as could be the bill that is passed as the opening round in the fight to preserve the Social Security system. 

The goal of the Social Security 2100 Act is not to be a permanent fix for Social Security. Although you probably won’t hear about this in the soundbites on the news, of the 14 things that could change in this bill, 12 of these changes will sunset in 2027. 

This proposal as its written now will include a fairly broad set of changes, and not all of these changes are going to affect everyone. There are some changes that are specific to public servants, changes specific to disability benefits, changes to how benefits are paid to survivors, and a few other nuanced changes that only affect specific groups, but there are also some broad changes that most everyone will feel. 

Let’s cover each of these changes individually.

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