Can I Escape Taxes While Collecting Social Security?

Senior worker
Photo by gpointstudio / Shutterstock.com

Welcome to “Social Security Q&A.” You ask a Social Security question, our guest expert provides the answer.

You can learn how to ask a question of your own below. And if you would like a personalized report detailing your optimal Social Security claiming strategy, click here.

Check it out: It doesn’t cost much and could result in you receiving thousands of dollars more in benefits over your lifetime.

Today’s question comes from Rose:

“I have been on Social Security for years with no other retirement pension. More than five years ago, I found I had to return to work in order to financially survive at the age of 69. I work for a nonprofit art museum, but Social Security taxes still are being withdrawn.

Will I ever get a raise in my Social Security check while I am able to enjoy it?”

No escape from Uncle Sam

Rose, I am sorry to report that as long as you continue working, you will never escape paying Social Security taxes. As you have observed, you will continue paying Social Security taxes even when you are receiving retirement benefits.

On the other hand, you can expect to receive increases in your retirement benefits. Every year, benefits are increased based on the cost-of-living adjustment (COLA) for the year ending in September.

Some years, retirees see no rise in benefits. For example, because inflation was low at the time, there was no adjustment for 2016. However, there was some good news this year: The increase for 2019 was 2.8%, the largest boost since the one for 2012.

The COLA for 2020 will be announced this fall.

Social Security sends you a statement each year that shows this adjustment. The statement also describes any deductions in your check for items such as Medicare and tax withholding.

Medicare premiums also always go up each year. For 2019, the premium for most people for Medicare Part B (which covers medical services and supplies, while Part A covers hospital services) went up from $134 to $135.50. (High-income retirees pay a higher premium for Medicare.) Tax withholding is optional, but is a good way to set aside money so that you are not hit with a big tax bill when taxes are due.

The reward for working later in life

Since you have returned to work, there is another factor that could increase your benefits: Retirement benefits are based on your highest 35 years of earnings, adjusted for inflation. If your salary now is higher than your earnings in any one of these previous 35 years or you did not previously work for 35 years, your benefits will reflect a recalculation and will be adjusted upward.

If you wish to check on your earnings history, set up an account at My Social Security. In addition to lots of other information, you will find a table there with your earnings history. The numbers in this table have not been adjusted for inflation, so they are not the actual numbers used in the calculation of your benefits.

For example, when calculating a taxpayer’s benefits, Social Security would multiply wages earned in 1980 by 4.02. So if that person earned $8,000 in 1980, his or her wages today would have to exceed $32,160 before today’s wages would replace the wages in 1980 in the benefit calculation.

Multipliers for other years can be found at the Social Security Administration website. Thirty-five years is a pretty long earnings history, so there may well be a year when today’s earnings are greater than a year in the past. That means your Social Security check may well go up — although perhaps only a little — in time for you to enjoy it.

If you have additional questions about your Social Security payout and how it could impact retirement, you might want to consider getting some inexpensive professional help.

Got a question you’d like answered?

You can ask a question simply by hitting “reply” to our email newsletter, just as you would with any email in your inbox. If you’re not subscribed, fix that right now by clicking here. It’s free, only takes a few seconds, and will get you valuable information every day!

The questions I’m likeliest to answer are those that will interest other readers. So, it’s better not to ask for super-specific advice that applies only to you.

About me

I hold a doctorate in economics from the University of Wisconsin and taught economics at the University of Delaware for many years. In 2009, I co-founded SocialSecurityChoices.com, an internet company that provides advice on Social Security claiming decisions. You can learn more about that by clicking here.

Got any words of wisdom you can offer on today’s question? Share your knowledge and experiences on our Facebook page. And if you find this information useful, please share it!

Disclaimer: We strive to provide accurate information with regard to the subject matter covered. It is offered with the understanding that we are not offering legal, accounting, investment or other professional advice or services, and that the SSA alone makes all final determinations on your eligibility for benefits and the benefit amounts. Our advice on claiming strategies does not comprise a comprehensive financial plan. You should consult with your financial adviser regarding your individual situation.

Find the right financial adviser

Finding a financial adviser you can trust doesn't have to be hard. A great place to start is with SmartAsset's free financial adviser matching tool, which connects you with up to three qualified financial advisers in five minutes. Each adviser is vetted by SmartAsset and is legally required to act in your best interests.

If you're ready to be matched with local advisers who will help you reach your financial goals, get started now.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
11 Secret Uses for Everyday Items That Will Save You Money
11 Secret Uses for Everyday Items That Will Save You Money

These are simple solutions for life’s irritations.

How to Save Up to 70% on 7 Everyday Purchases
How to Save Up to 70% on 7 Everyday Purchases

Stop getting sucked into paying a premium when good alternatives are available at huge savings.

15 of the Fastest-Growing Jobs Today
15 of the Fastest-Growing Jobs Today

Times are tough, but these career fields are thriving.

3 Big Medicare Costs Just Got Bigger
3 Big Medicare Costs Just Got Bigger

Some Medicare premiums and deductibles for 2020 will take a bigger bite out of Social Security payments.

5 Ways to Avoid Taxes on Social Security Income
5 Ways to Avoid Taxes on Social Security Income

Here’s how to minimize and delay the chunk that Uncle Sam claims.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

7 Unusual Ways to Declutter Your Home
7 Unusual Ways to Declutter Your Home

Tired of possessions weighing you down? Here are seven ways to declutter painlessly and effectively.

This Is the Most Popular Age for Claiming Social Security
This Is the Most Popular Age for Claiming Social Security

Both men and women are most likely to start receiving Social Security benefits at this age.

21 Things You Should Always Buy at a Dollar Store
21 Things You Should Always Buy at a Dollar Store

Dollar stores have great bargains on both everyday and occasional purchases.

6 Things You Should Never Buy at Trader Joe’s
6 Things You Should Never Buy at Trader Joe’s

We love Trader Joe’s for plenty of reasons. But think twice about this handful of products.

Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?
Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?

You could save more than $30,000 by setting aside these costly expenses for just one year.

Don’t Toss These 7 Household Items — Sell Them
Don’t Toss These 7 Household Items — Sell Them

Here’s how to earn cash as you give new life to these unwanted items.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have these documents that are crucial to their golden years — especially during a pandemic.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

Eat This Food If You Want to Avoid Alzheimer’s Disease
Eat This Food If You Want to Avoid Alzheimer’s Disease

One type of food associated with the Mediterranean diet offers especially large benefits.

5 Awesome Places You Can Retire Overseas on $2,000 a Month or Less
5 Awesome Places You Can Retire Overseas on $2,000 a Month or Less

In this week’s podcast: tips on retiring overseas — from someone who’s been helping American expats for decades.

11 Expenses That Quietly Drain Your Wallet
11 Expenses That Quietly Drain Your Wallet

It’s scandalously easy to overspend in these areas of your life.

9 Dumb Ways You Are Ruining Your Home Value
9 Dumb Ways You Are Ruining Your Home Value

Homeowners, beware these mistakes that can drive away potential buyers.

18 Amazon Purchases That We Are Loving Right Now
18 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

15 Outrageously Overpriced Products — and How to Save on Them
15 Outrageously Overpriced Products — and How to Save on Them

Retailers mark up products by hundreds of times their cost — but you don’t have to pay the premium.

Why Half of Retirees Now Owe Taxes on Social Security
Why Half of Retirees Now Owe Taxes on Social Security

Growing numbers of seniors are paying taxes on their Social Security benefits, but you might be able to avoid this fate.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.