Advanced Underwriting Consultants

Ask the Experts – March 19

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: My client, age 64, is receiving his Social Security retirement benefits early. He’s not working, but he is periodically taking distributions from his employer-sponsored retirement plan. Do these distributions reduce my client’s Social Security benefits?

Answer: No.

The general rule is that if an individual begins receiving Social Security benefits before his full retirement age (age 66 for your client), and earns more than $15,480 in 2014, then his benefits will be reduced by one dollar for every two dollars in earnings above the limit.

What income counts toward this $15,480 limit? Here’s what the Social Security Administration says:

If you work for someone else, only your wages count toward Social Security’s earnings limit. If you are self-employed, we count only your net earnings from self-employment. For the earnings limit, we do not count income such as other government benefits, investment earnings, interest, pensions, annuities and capital gains.

Therefore, your client’s retirement benefits shouldn’t be reduced merely because he is also receiving money from his retirement plan.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.