AssetBuilder Inc. Registered Investment Advisor - Simple Investing. Smart Future.

Hi,

 A friend of my husband's asked this question -- I looked it up and realized it is not really easy to find out.  So, is the interest on a money market account "earnings"?  Is 'earnings' just employment wages, or is it the total income on the tax return?

 http://www.socialsecurity.gov/pubs/10069.html  seems to indicate that it is just "earned from work" income.

Let us say that you begin receiving Social Security benefits at age 62 in January 2008 and your payment is $600 per month ($7,200 for the year). During the year, you work and earn $20,480 ($6,920 above the $13,560 limit). We would withhold $3,460 of your Social Security benefits ($1 for every $2 you earn over the limit). . .

Social Security is all about your LABOR earnings. What you make by working. You can have an unlimited income from interest, dividends, capital gains and rents and it will not effect your benefit between age 62 and your full retirement age. (That's when what you can earn from working is limited and can reduce your SS benefits.)

Regardless of your age, income from labor or non-labor sources can cause your benefits to become subject to the federal income tax.

Scott

Thank you.  Based on your second sentence, I went back to the social security website and found out that determining whether your benefits are taxed is not exactly straightforward; you have to fill out the IRS worksheets to figure out what is going on. 

It sounds to me like if Felicity Frugal saved a lot of $ for retirement and wants to take her benefits early and sit around enjoying her unearned income plus SS benefits even though she has to pay taxes on it, that makes more sense than for Sally Spendthrift, who needs to keep working after 62.  Sally might as well wait until full retirement age because her actual BENEFIT could be decreased.

I think you are right, but it depends on Felicity's life expectancy.  If she is going to live past her late eighties then she comes out ahead by waiting and getting a larger check.  Personally, I plan on living to be 95, like my Great-Aunt Dora did, but I will probably take my SS benefit anyway at 62, just to get my money up front.