Advanced Underwriting Consultants

Question of the Day – July 5

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: I have a client, age 64, who is taking early retirement benefits from social security.  He is not currently employed, but his spouse is.  They are married, and file a joint income tax return.  Does the earned income of the spouse reduce the early retirement benefits of the client?

Answer: No.

If earnings are too high during a calendar year before an early retiree reaches full retirement age, the benefit for that year may be reduced. Starting with the month a retiree reaches full retirement age, the retiree can earn as much as possible without having a reduction in benefits.

Earnings include wages and net earnings from self-employment. Earnings do not include pensions, annuities or investment income.

In general, an early retiree who earns too much will have social security retirement benefits reduced by $1 for every $2 of excess earnings in a calendar year. The calculation of how much is too much depends on

  • Whether social security benefits were paid for the whole calendar year, and
  • Whether the taxpayer has reached full retirement age in a given year.

Only the early retiree’s earnings count with regard to the possible reduction of benefits—not the spouse’s.  However, the spouse’s taxable income counts for joint filers in figuring out how much of the social security benefit might be taxable.

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.