Would it make sense to file for Social Security while making a salary of $55,000?

by Ibolya Balog, CPA | Mar 23, 2017

I’m presently 64, vested at 66 for full benefits.

It really depends on personal circumstances, and the question only reflects part of the information necessary to make the best decision.

Social Security benefits represent a lifetime annuity in retirement, and in later years it may be especially important to receive as large an income as possible because cost-of-living adjustments will be applied to the initial amount of benefits and usually are less than the inflation affecting retirees.

If the person is in good health with a reasonably long life expectancy, expects to work until at least age 66, and can live on the $55,000 salary for two more years, then it is better to wait until full retirement age at 66 since the benefits increase by 7 percent each year. That is more than what could be earned if taking the benefit now, paying income tax on 85 percent of the benefit collected, and investing the after tax net Social Security income in a safe investment for two years. However, if there are health concerns or a family history of illnesses that could shorten life expectancy to below the average, then it may make sense to take the reduced benefit.

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Answered by: Ibolya Balog, CPA, is an associate professor at Cedar Crest College in Allentown, Pa.
The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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