Social Security Complexities

by David D. Holland


Figuring out Social Security benefits can be complicated, especially when it comes to early retirement, divorce and survivorship. Common concerns among retirees include:


“Can I draw Social Security benefits and continue to work?”

Once you’ve reached full retirement age, you can draw Social Security and still work full-time without penalty. However, if you take benefits early and continue to work, you could be penalized. For example, if your full retirement age is 66 but you choose to take Social Security benefits at 62, you will lose benefits if you earn more than $15,120 in gross wages in 2013. The Social Security Administration will deduct $1 in retirement benefits for every $2 you earn over that amount (according to the website). Non-employment sources of income, like interest, dividends, capital gains and IRA distributions, do not count as gross wages and would not trigger the penalty. It is also important to note that the cap and related penalties are based on individual earnings; if you take Social Security at 62, your spouse’s wages don’t count toward your $15,120 limit.


“How are Social Security retirement benefits taxed?”

Unlike the penalty that can be incurred for early benefit election with continued employment, age is not a factor for how Social Security benefits are taxed. Whether you draw your benefits early at 62 or delay until 70, it is your total income that determines if you’ll pay income taxes on your retirement benefits. A special formula is used to make the taxation determination: Adjusted Gross Income + Non-taxable Interest + ½ of Social Security Benefits = “Combined Income.” For single taxpayers, none of your Social Security should be taxable if your “combined income” is less than $25,000. If your income is between $25,000 and $34,000, you could pay income taxes on as much as 50% of your Social Security benefits. If your income is over $34,000, you could owe tax on 85% of your benefits. For taxpayers filing jointly, the formula works the same, while the “combined income” limits are higher: under $32,000 equals no tax, $32,000 to $44,000 means up to 50% of Social Security benefits can be taxed, and $44,000 and over means that up to 85% of the retirement benefits could be taxed. If you think you’ll owe taxes on your Social Security payments, you can make quarterly payments to the Treasury or have taxes withheld.


“Does one spouse’s benefit amount affect what the other spouse gets?”

Each person’s retirement benefits are based on their own history of earnings, but higher benefits may be available by having the Social Security Administration “look” at the benefits earned by a current spouse, ex-spouse or deceased spouse. Taking a higher benefit based on someone else’s Social Security benefits doesn’t affect the amount the other person receives.


“How much can I draw on my spouse’s Social Security?”

Even if you never worked, you can draw as much as one-half of your spouse’s full retirement benefit at your own full retirement age. Your spouse must file for benefits before you can begin to receive your benefits based on his or her earnings record. Just like your own retirement benefits, if you draw benefits before your full retirement age, the amount will be reduced.


“How does death of a spouse affect retirement benefits?”

Generally, retirement benefits paid to a surviving spouse are the greater of his/her own benefits or that of the deceased spouse; in other words, you can step up and into the deceased spouse’s “shoes” and continue to receive their Social Security benefits if they are greater than your own.


“How does divorce impact retirement benefits?”

You can draw up to one-half of your ex-spouse’s full Social Security retirement benefit amount as long as 1. your ex-spouse is eligible to draw benefits, 2. the marriage lasted at least ten years, 3. you are unmarried and 4. you are 62 or older. If your ex-spouse is deceased and you otherwise qualify, you can collect up to 100% of his/her Social Security benefit (just like a widow or widower). Conveniently for everyone concerned, drawing off the earnings record of an ex-spouse (living or deceased) won’t affect the Social Security benefits received by his/her current spouse.


More than one earnings record is often considered by the Social Security Administration when figuring each person’s monthly payments. Visit for helpful retirement benefit calculators and information.



David D. Holland, a CERTIFIED FINANCIAL PLANNER™ practitioner, hosts a weekday radio show at 9AM on AM1380 Ormond Beach, AM1230 New Smyrna Beach and AM1490 Deland. He has also authored two books in his Confessions of a Financial Planner series. Holland offers investment advice through Holland Advisory Services, Inc., a registered investment adviser in Ormond Beach. He can be contacted at (386) 671-7526. Email your financial questions to