“Unretiring” Has Become an Option for Many Dealing With the Economy…But be Careful! - cnbc.com

We’re in a pretty tough economy right now, and the outlook for the near term doesn’t look promising. As a result, and perhaps spurred on by the constant barrage of “help wanted” postings and cries of “worker shortages” we hear nearly every day, many older folks have turned to re-entering the workforce as a financial coping mechanism. Pretty simple, right? Just go back to work and restart an income stream to help make ends meet.

But what about those who’ve opted into Social Security benefits before their full retirement age? For them, it’s not as clear cut. The program’s “earnings test” comes into play for those folks, and depending on the amount of income added back into the picture, it can negate some of the advantage. In a post on cnbc.com, personal finance reporter Lorie Konish outlines how this often misunderstood provision in Social Security’s complex rule structure can impact those taking the “unretiring” path, and explains how the effect is really only a temporary setback.

As Ms. Konish notes, the “earnings test” is not a factor for those at or past their full retirement age. There is one other factor that should be taken into account, though, when electing a return to work, and it applies irrespective of proximity to one’s full retirement age. That’s the effect on the taxation of Social Security benefits. Remember that current law requires a portion of you Social Security benefit to be included in calculation of your adjusted gross income for federal tax purposes; depending on your income level, this could result in a portion of your benefit being, in effect, reduced via federal income taxation.

Read Ms. Konish’s cnbc.com post here. If the issues addressed in this post generate any questions in your mind, know that the AMAC Foundation offers a free-to-the-public advisory service that can guide you. To learn more about this service, visit the Foundation’s website here

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