Working After 65?
This Week's Quote:
“If you are positive you'll see opportunities instead of obstacles.”
-Widad Akrawi
For a multitude of pandemic and economic reasons, more and more Americans aged 65 and older are working. A study by MagnifyMoney shows that in May, 2022 - 21.9% of Americans over the age of 65 were still working. Two years earlier, that same percentage was 19.5%.
Here are some tax and other considerations of being in America’s workforce past the age of 65:
If your employer offers health insurance or your spouse’s employer, it may make sense to delay becoming a part of the Medicare program; especially, if your employer has more than 20 employees. Under 20 employees, Medicare is usually the best option. Be sure to do the math.
If you enroll in Medicare, saving to an HSA plan is no longer an option.
If you begin drawing Social Security before your Full Retirement Age (FRA), income limitations apply that may reduce your benefits. In 2022, your Social Security benefits will be reduced by $1 for every $2 you earn over $19,650. In the year FRA is reached, the calculation changes to a reduction of $1 for every $3 earned over $51,960 up until the month before the month that you reach FRA.
The good news is that once your FRA is reached your Social Security benefits are not reduced regardless of how much you may earn. However, you will continue to pay into Social Security as an employee and/or as a self-employed individual, regardless of age.
The bad news is that up to 85% of your Social Security benefits may be taxed. The Social Security contributions you paid into the system used after-tax dollars. Now when you pay income taxes on your benefits, we have a situation of being double-taxed. Most taxpayers pay at least some income tax on their Social Security benefits. The State of Ohio, Ohio cities and school districts do not tax any portion of your Social Security benefits.
Please note that when your modified income from two (2) years ago is over $91,000 for single filers or over $182,000 for joint filers, the premiums you pay for Medicare Parts A and B will increase. This comes often as an unpleasant surprise as your benefits mysteriously decrease. Then a letter from the Social Security Administration arrives with an explanation. This increase in premiums may be appealed if the bump in income was the result of a “once in a lifetime event.”
Many of the above ideas came from an article titled, “4 things you should know about working after you turn 65”. published in the Dayton Daily News written by Kate Ashford of NerdWallet.
Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.
This Week’s Author, Mark Bradstreet
