Things Everyone Should Know About Social Security Taxes and Retirement Benefits

December 28, 2016

  1.  Most workers pay 6.2% of their payroll taxes into the Social Security system and employers match that amount.  Self employed individuals pay 12.4% of their income to Social Security.  Taxpayers can check the amounts they have paid online by setting up an account with Social Security.
  2. There is a $127,00 tax cap on Social Security taxes.  Income above this amount is not subject to Social Security taxes.
  3. Your Social Security benefits are calculated based upon the 35 years in which you earn the most money.  Working more than 35 years can increase your benefits because years with lower earnings will drop out.
  4. The average Social Security Retirement check is $1370.  Retired couples typically average $2260.  Payments are adjusted yearly based on the cost of living adjustment.
  5. Workers first become eligible for retirement at age 62, but monthly payments are reduced if you elect to take benefits at this age.
  6. The baby boomer full retirement age is 66.  If you are born after 55, the retirement age gradually increases.
  7. The full retirement age will be 67 for individuals born in 1967 or later.
  8. Social Security Retirement benefits will increase if an individual delays taking the benefit.  The benefit will increase each month after the full retirement age up to age 70.  Monthly payments can be 24-32% if an individual delays retirement until age 70.
  9. If you elect to draw benefits prior to age 65 and you continue working, your benefits may be reduced if you earn more than $16,920 (in 2017).  Beneficiaries who exceed the earnings limit will have $1 deducted from their checks for each $2 they earn over $16,920.  Those who turn 66 in 2017 will have a higher earnings limit of $44,880 and the penalty declines to $1 withheld for every $3 earned.  Once you turn 66, there is no benefit reduction for any amount of earnings and your payments may be increased to give you credit for ongoing income.
  10. If the sum of your adjusted gross income, nontaxable interest and one-half of your Social Security benefits exceeds $25,00 or $32,000 for couples, half of your Social Security benefits become subject to income tax.

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