You can begin to collect Social Security retirement benefits as early as age 62. However, if you are still working then, your employment income can affect the value of your Social Security benefits in two ways:
1. Your benefits will be reduced if you start before your Normal Retirement Age (NRA), which is 66 for people approaching 62 now. If you start benefits before your NRA, $1 of benefits will be withheld for every $2 you earn in wages and self-employment income over $14,160, in 2009. Thus, you’ll receive no benefits if your annual earnings this year are more than $42,480.
2. You’ll owe income tax on Social Security’s benefits if your income exceeds certain levels. You’ll owe tax on up to 50 percent of benefits if your income (by Social Security’s definition) is in the $25,000-$34,000 range, for individuals, or $32,000-$44,000, for married couples filing jointly. With higher incomes, up to 85 percent of your benefits may be taxed.
If you start taking Social Security benefits and later go back to work, you can use this tactic: pay back all benefits you’ve received to date. You won’t owe interest or any inflation adjustment, yet you can re-start your benefits later and get a higher monthly benefit.
