Taxable of Social Security the year you retire early (years, husband, benefits)

[PapaGeek]

I plan to retire in May when I turn 62 so I will be collecting WST for 5 months and SS for 7 months.

The breakpoints for taxation of Social Security are $25,000 and $34,000 based on half of my benefit plus my other income. Since my income that year will be earned BEFORE I collected the Social Security benefits, are there any special rules for doing the taxability calculations that first year?

[mathjak107]

the first part does not count as far as give backs but it does count as income as far as getting ss taxed .

[rjm1cc]

Originally Posted by PapaGeek

I plan to retire in May when I turn 62 so I will be collecting WST for 5 months and SS for 7 months.

The breakpoints for taxation of Social Security are $25,000 and $34,000 based on half of my benefit plus my other income. Since my income that year will be earned BEFORE I collected the Social Security benefits, are there any special rules for doing the taxability calculations that first year?

Be sure you evaluate the difference of taking SS at 62, FRA or 70. This is an important decision.

[reed303]

Originally Posted by PapaGeek

I plan to retire in May when I turn 62 so I will be collecting WST for 5 months and SS for 7 months.

The breakpoints for taxation of Social Security are $25,000 and $34,000 based on half of my benefit plus my other income. Since my income that year will be earned BEFORE I collected the Social Security benefits, are there any special rules for doing the taxability calculations that first year?

No.
Just complete the Worksheet found in the IRS 1040 Instructions. ( See sample here on page 16 of http://www.irs.gov/pub/irs-pdf/p915.pdf ). Then carry over any taxable amount, if any, to Form 1040.

Or there is an on-line calculator here https://www.calcxml.com/calculators/...t-may-be-taxed where you can do "what-if" estimates.

Have fun...........

[selhars]

God forgive me for muddying the waters.....
....but I thought there was a thread a while back where someone was talking about how the first year you retire and take Soc. Sec, they calculate what you made that year in a by the MONTHLY formula, so you could go over for the month and still get hit, even if it wasn't technically to high for the year.

I never did understand what people were talking about. But that was a hell of a complicated scenario and thread. And the OP kept trying to explain it, but I never did get it. They said it only affects the first retirement year's earnings calculation.

I remember thinking..... I'll just retire one year wait until the next and then collect....THAT"S how complicated and confusing that thread was.

[mathjak107]

if they counted the first part of the years earnings to see if you have to give back few could retire within any given year .

what you have to be careful of is fra to 70 where they only give you delay credit for the previous year in January .

[PapaGeek]

First of all, my apology. I talked about me in the first post, this is actually about my GF and her planned retirement in 3 years at the age of 62. Just trying to get the answers so we can plan if she retires in January or May.


Thanks mathjak, that is what I was concerned about, but the good part of that is that it does take her to where the full 85% of her SS is taxed. Not good in itself, but opens the door to starting her annuity a year early and not using ROTH to make up the difference.


Thanks rjm, we are taking that into consideration. One reason she is my GF, not Mrs, is that she is a widow. When she starts SS at age 62 it will be on her late husband’s survivor benefits and we will wait till her age 70 to start her benefits. Yes it was an important decision, but we beat the system both ways.


Reed, I will definitely look at those links!



Again, thanks to all, all of the information has been helpful.



By the way, she will be 59.5 this year and we are in the process of converting as much of her IRA to ROTH as the 25% bracket will allow. As a note, we consider this a useless process if you pay the taxes by using the IRA money, converting $30,000 of IRA holdings to $20,000 of ROTH with the other $10,000 going toward taxes. In our opinion the real benefit in this conversion is that we can pay the taxes out from non-IRA funds to make a large increase in ROTH savings.