How Work Impacts Social Security Benefits

Claim spousal benefits while working. Spouses are entitled to Social Security payments of up to 50 percent of the higher earner's check if that amount is higher than the benefit based on his or her own earnings. Married couples who both work can claim each of these payments at different times. Duel-earner couples who have reached their full retirement age can claim a spousal payment and then switch to payments based on their own work record later, which will then be higher due to delayed claiming. For example, a married woman planning to retire at age 70 could claim a spousal payment based on her husband's earnings at age 66 and then claim again based on her own earnings when she leaves her job at age 70. "You can get four years of spousal benefits during a period when you were anticipating getting nothing, while still building up the delayed retirement credits," says Eschtruth.

Suspend payments. Some workers claim Social Security benefits after a job loss or trial retirement, but later decide to go back to work. There is no penalty for working and claiming Social Security benefits at the same time after your full retirement age. But there is another option to boost your Social Security payouts. Those over full retirement age can voluntarily suspend Social Security payments, which will allow you to earn delayed retirement credits and permanently increase future monthly benefits.

[See 12 Ways to Fix Social Security.]

Taxes on benefits. You may have to pay federal income taxes on your Social Security benefits if you earn too much. If your adjusted gross income, nontaxable interest, and half of your Social Security payments add up to more than $34,000 ($44,000 for couples) in 2010, you many have to pay federal income taxes on up to 85 percent of your Social Security benefits. If that sum adds up to between $25,000 and $34,000 and ($32,000 and $44,000 for couples) this year, you could be taxed on up to half of your entitlement checks.

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