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By: Brian Bristow

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Should You Keep Working after Retirement?

Saving and Budgeting | Investing in the Future

There are many reasons why working after retirement might appeal to you. You may want to keep your mind active or stay socially active. You may just need more money to support your lifestyle. Either way, post-retirement work can affect your Social Security benefits. So, if you’re thinking of retiring soon or are already retired, here’s what you need to know before you settle into another job.


If you retire and stop working, the federal government will not tax your Social Security benefits. If you work after retirement, the federal government may tax up to 85% of your benefits. In Vermont, you’ll also be taxed by the state government. Both federal and state governments determine the taxability of your benefits based on your provisional income.



What is provisional income?

Provisional Income is an income level the IRS uses to calculate whether or not a tax should be applied to your Social Security benefits.


The formula for provisional income looks like this:

Gross income (salary before deductions)
+ Tax-free interest (as reported on form 1099 INT)
+ 50% of Social Security benefits
+ Other tax-free benefits and exclusions (discounts, awards, etc.)
Income adjustments (except student loan and tuition and fee deductions, and domestic production-activities deduction)


As you can see, income, deductions, interests, and other adjustments are all added together and they can add up quickly.




What are thresholds for taxation?

The threshold for taxation depends on what your filing status is.


If you file your income taxes as an individual and make more than $25,000, up to 50% of your annual Social Security benefits are subject to federal taxes. If you make more than $34,000, the federal government could tax up to 85% of your benefits.


If you file jointly, the threshold is higher, taxing up to 50% of Social Security benefits when you make more than $32,000, and 85% of your benefits if you make over $44,000.


Learn some surprising facts about Social Security. Download our Social Security Infographic.


In addition, Vermont matches the federal law on taxation, using the same rules and thresholds as the IRS to determine taxes on your benefits.


Provisional income thresholds have remained the same since 1983, when they were established. At that time, 10% of Social Security recipients were taxed on their benefits. Because the thresholds haven’t changed but income levels have, more than 50% of Social Security recipients were taxed in 2015.



Planning for a tax-free retirement

If you want to work after retirement, this information does not suggest that you can’t. It’s just good to understand the rules so that you know what you’re giving up when you start making more money. It is wise to sit down with a tax professional to help you weigh the pros and cons.


Still building your nest egg? Check out our eBook for tips that will

help you plan for an easy trainsition into retirment. 




Representative is not a tax advisor. For information regarding your specific tax situation, please consult a tax professional. Representatives are registered, securities are sold, and investment advisory services are offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 800-369-2862. CBSI operates under the marketing name of MEMBERS Financial ServicesTM. Insurance sold through licensed CUNA Mutual Life Insurance Company Representatives, and in New York, licensed insurance representatives of other companies.  Nondeposit investment products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. FR-2163880.1-0618-0720 

About Brian Bristow

Brian Bristow is the program manager and financial advisor with MEMBERS Financial Services located at VSECU.