Hey, did you know that you might have to pay income tax on your Social Security benefits?
Not everyone does, but if you continue to work past retirement age, as many people do these days, your tax liability will be based on your salary, plus tax-free income, plus one-half of your Social Security benefits. This could result in a portion of your benefits being taxed.
The tax rate will vary depending on your total income. The lower the income, the lower the rate.
Also, if you begin collecting while still working and younger than the full retirement age, your benefits may be temporarily reduced until you become fully eligible. The good news is the money will be credited to your account, so that when you reach full retirement age, you will receive a higher benefit.
Your tax advisor or an accountant can help if you have any more questions about how your Social Security benefits might be taxed.
See you next time on Money Matters!