Working After Retirement May Affect Your Benefits


Ministers often work beyond the “normal” retirement age. Extending your work life can affect your taxes and retirement benefits.

Earnings limit. If you’re working, you probably should forgo the early payment option. Benefits received before full retirement age will be reduced by $1 for every $2 earned over an annual limit (currently $14,160). However, you will receive an increase when you do reach full retirement age and your payments will not be reduced thereafter no matter how much you earn.

Taxable benefits. Even if you are receiving Social Security retirement benefits, you’ll continue to pay Social Security tax on any income you earn from wages or self-employment. Up to 85% of your Social Security retirement benefits may become subject to income tax, depending on the amount of your other income. An important tax planning strategy that most ministers overlook is to maximize your clergy housing allowance exclusion from ministry pension plans to avoid extra taxation on your Social Security retirement income.  Retired ministers can save thousands of dollars in taxes by using this and other tax saving strategies.

Social Security  “full” retirement age threshold ranges from 65 to 67, depending on your birth date. However, you can elect to start receiving lower payments as early as age 62, or you can maximize your benefits by forgoing them until you’re 70. Once you reach age 70, there’s no incentive to postpone your benefits further, since you’ll already have reached your maximum.

Working beyond retirement age can require several complex decisions. Call us to schedule a complimentary consultation to see what’s best for you. Call 970-667-5819 or tune into our webinar, “Social Security in a Winning Retirement Strategy,” for great information.