Because Social Security is an insurance system, there are only two criteria that you have to satisfy to collect Social Security retirement benefits: You have to have worked for a certain number of years, and you must have paid FICA taxes during your working years. If you've done both, you'll be eligible to receive Social Security benefits regardless of how much or how little you have in your savings account.
Spouse’s Work Record
If you haven't worked long enough to qualify for Social Security retirement benefits based on your own work record, you might be eligible to receive benefits based on the work history of your current or former spouse. If you qualify for retirement benefits based on your spouse’s or ex’s work record, you'll generally receive monthly payments that are half of what your spouse or ex-spouse collects each month.
Working During Retirement
Although the money in your savings account doesn't affect your eligibility to receive Social Security retirement benefits, money you make after you begin receiving Social Security benefits might. For instance, if you begin collecting benefits before your full retirement age and you earn more than an amount identified by the Social Security Administration, your benefits will be reduced by $1 for every $2 that you earn above that threshold. Even though the Social Security Administration counts only the money that you earn before the month in which you reach your full retirement age, your benefits will be reduced by $1 for every $3 that you make above a different earnings limit in that tax year. Your benefits won't be reduced based on your earned income after your full retirement age.
Although your eligibility for Social Security and your benefit amount are determined independent of the money you've saved, your savings could affect whether your Social Security retirement benefits are taxed. In general, Social Security benefits aren't taxed by the IRS unless you have other sources of income -- such as an interest-bearing investment account -- that ultimately cause your combined income to exceed thresholds that are determined by your marital status and the way you file your federal taxes. The modified adjusted gross income that you report on your taxes equals your adjusted gross income plus non-taxable interest that you’ve earned on your investments. Your combined income is the sum of your modified adjusted gross income plus half of your annual Social Security retirement benefit. If your combined income is above certain limits, up to 85 percent of your Social Security benefits might be taxed as ordinary income.
If you have savings in a traditional individual retirement account and you're older than 70 1/2 and must take minimum distributions from your account, those withdrawals have the potential to affect the tax status of your Social Security retirement benefits. That's because they'd increase your adjusted gross income, and thus your modified adjusted gross income and combined income. Tax-free withdrawals from a Roth IRA won't affect your combined income.
- Social Security Administration: Benefits Planner: Income Taxes and Your Social Security Benefits
- Social Security Administration: Retirement Planner: If You Are Divorced
- Social Security Administration: Benefits for Spouses
- Social Security Administration: Retirement Planner: Getting Benefits While Working
- Charles Schwab: Making the Most of Your Social Security Benefits
- MassResources.org: Social Security: Am I Eligible?
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