The One Secret you can not miss...

After years of hard work, Elsa can now relax on the beach, soaking in the sunshine and ocean breeze, losing track of time. “Ding,” she gets a notification, that her social security benefit hit the bank. As she anticipated, a $2K should show up; however, it is $800; she was like, WTF....

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Elsa, a 63-year-old banker, worked by helping count other people’s money for 25 years; now it is time for her to count her own money. At this moment, she was confused; she knew that she could get a 30% cut if she retired early. However, Elsa didn’t know she could get an additional cut by working as a part-time banker and collecting social security.

1.  How to get Social Security Benefit

   Requirements:

   •40 credits or about 10 years of work (Max 4 earned credits each year) •2024, one credit for every $1730 earned income. https://faq.ssa.gov/en-us/Topic/article/KA-01921

2. Retirement benefit is based on...

   Your Primary Insurance Amount Average Indexed Monthly Earnings (AIME) Based on your lifetime earning history, calculated using your highest 35 years of index earnings.

3. Determining your Full Retirement Age

Year of Birth Full Retirement Age

Let’s look at our mama here, Elsa, born in 1961, age 63 in 2024. She has worked as a banker for 25 years, is single, and has no kid.

According to the Social Security Admin, her Full Retirement Age (FRA) will be 67, and she will be entitled to full Social Security Benefits. If she begins getting benefits before reaching FRA, and continues working, then the Social Security earnings limit applies.

Elsa’s Primary Insurance

How much can Elsa get?

Instead of getting 100% Social Security Benefit, she gets 30% off. She can earn up to $22,320 in 2024 and her Social Security benefits will not be reduced. Elsa earns $50,000, the earning limit is $22,320, and she receives $1400 a month ($16,800 per year) in Social Security. She earns over $27,680 ($50,000-$22,320), and Social Security can take back up to $13,840 of her benefits ($1 for every $2 earnings over the limit).

The rule above applies until the year you reach FRA. A larger earning limit and a different rule apply the year you reach FRA. In 2024, that maximum amount is $59,520/year. If you earn more than that, your benefit would be reduced $1 in Social Security Benefits for every $3 you earn over that limit.

The Secret to avoid the penalty

Note: Under this rule, income from investments, pension benefits, IRA withdrawals, and unemployment benefits does not count as earnings. So... What type of income will not trigger an early retirement Social Security benefits penalty?

• Rental Income

• Investment Income (Stocks, Dividends)

• Interest Income

• Passive Income (S-Corp, Partnership income)

  So... if Elsa only has rental income and nothing else, she does not need to pay early retirement penalty at all.

Delayed retirement age to age 70. 8% more for each year for up to 4 years (32% Max) COLA will also applied

Are your Social Security Benefits taxed when received?

Individuals who have higher combined incomes could be taxed up to 85% of their Social Security Income. For middle-income earners, up to 50% of their Social Security income could be taxable. For lower-income people, none of the Social Security income is taxable.

Key Take Aways:
Figure out how much you need for retirement. 
Your lifestyle.
Talk to a tax professional about the tax impact of taking social security while working.

For more information please contact us:

K’s Tax Service (702)325-4276

kstaxservice.com

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