Working past 65? Make the most of your benefits

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People often work beyond the average retirement age. But that is not a fixed number. For Social Security purposes, the “full” retirement age threshold ranges from 65 to 67, depending on your birth date.

Here’s what you’ll need to know about your federal retirement and health insurance benefits if you plan on working past your middle 60’s:

1> Social Security

a. Eligibility: You can elect to start receiving lower Social Security 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 is no incentive to postpone your benefits further, since you’ll already have reached your maximum. Your payments will not be reduced thereafter no matter how much you earn.
b. Taxable Benefits: Up to 85 percent of your benefits may become subject to income tax, depending on the amount of your other income.
c. You could still be paying: Whether or not you draw your benefits, you’ll continue to pay Social Security and Medicare taxes on any income you earn from wages or self-employment.

2> Medicare
a. Eligibility: Medicare eligibility begins the year you reach age 65. The program encompasses four types of coverage: Medicare A (hospital insurance), Medicare B (general medical insurance), Medicare C (supplement medical insurance) and Medicare D (prescription drug coverage)
b. Benefit details: Medicare B and D are neither free nor mandatory, but either are often used as a stand-alone program or with a private plan. If you have creditable coverage at work (i.e. coverage that’s at least as good as Medicare), you can postpone signing up for Medicare B and/or D until you’re no longer employed. Your employer’s plan also may offer Medicare C, which provides for private programs administered under contract with the government. These plans typically merge Medicare A and B benefits with other coverage.

Working beyond retirement age can require several complex decisions that can affect your tax obligations. Be aware of the various options you have and how they will affect your monthly benefits over the years you are receiving benefits. Waiting until 70 increases your monthly benefit and if you can afford to wait, is a great idea, but there are other factors to consider as well. Good tax planning can help you make the best decision for you.

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