If you take Social Security early while you're still working, you can lose benefits if you make more than a certain amount of money. But it can be confusing to determine what counts as earnings in calculating that amount.
In the following video from our Social Security Q&A series, Dan Caplinger, The Motley Fool's director of investment planning, answers a question from Fool reader Jacque, who asks whether your take-home pay after deductions or total pay before deductions are used to calculate any benefit reduction. Dan notes that wages for Social Security aren't always the same as wages for federal income tax purposes, with items such as 401(k) contributions reducing your federal taxable income but not your Social Security income. Dan points out that this can be good or bad -- good because it can raise your benefits based on your work history, but bad for people in Jacque's situation who take early Social Security benefits and still work. Dan concludes that those who make make more than $15,480 in earned income in 2014 might choose to delay taking Social Security to avoid forfeiting some benefits.
Have general questions about Social Security? Email them to [email protected], and they might be the subject of a future video!
Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.