Most questions we financial advisors receive about Social Security relate to when clients are required to start, when it is optimal to start, and how much will they lose or gain by claiming before or after full retirement age. I was recently preparing a presentation about these topics. Then I dug into the taxation of Social Security benefits and was reminded of Robert Kiyosaki’s quote, “It’s not how much money you make, but how much money you keep.”

In 1983 the Regan administration passed legislation to begin taxing up to 50% of Social Security benefits. In 1994 the Clinton administration began taxing up to 85% of benefits. Both pieces of legislation had income thresholds. See the chart for details. 


50% of Benefits Taxed




Single, HH, Filing Separately

$25,000 – $34,000

$25,000 – $34,000


Filing Joint

$32,000 – $44,000

$32,000 – $44,000


85% of Benefits Taxed


Single, HH, Filing Separately




Filing Joint





In the past three years (2021-2023), Social Security’s aggregate cost of living adjustment (COLA) was 17.8%. The last 3-year rolling period the COLA was this high was the 1981-1983 timeframe, which was 22.1%.

There has not been meaningful Social Security benefit tax legislation in 30 years. Benefits have steadily increased through the years, but the taxable income tiers have not been indexed with benefits. 

According to the Social Security Administration, “Since 1984, the proportion of beneficiary families whose benefits are taxed has risen over time from less than one in 10 to more than half. By 2030, MINT [Social Security Administration’s forecasting program] projects that 58 percent of beneficiary families will owe income tax on their Social Security benefits.” However, this study was issued in December 2015, and it assumed Congress would amend the tax code to adjust the tax brackets, which it has not. This has resulted in more Social Security beneficiaries falling into the taxable tiers.

No rule says you can’t continue to work while receiving Social Security benefits. While having 70% of a dollar is better than none at all, you just have to be mindful of how much you’re earning if you’re under full retirement age and receiving benefits.

For 2024, Social Security recipients who have not yet reached full retirement age can earn up to $22,320 without dinging their benefit amount. If your earnings exceed the limit, your Social Security benefits will be reduced by $1 for every $2 you’re over the limit.

In the year you reach full retirement age, the reduction becomes $1 for every $3 earned over the limit, which is $59,520 for 2024. Social Security will only count your earnings up to the month before you reach full retirement age, not your earnings for the entire year.

The good news is that once you reach full retirement age, you can earn as much as you like without your benefits being penalized. But keep an eye on the impact that your earnings amount might have on your tax liability.

Social Security can be confusing. It feels easy to go along with what your relative, colleague, or neighbor is doing. Yet because everyone has a different situation and there are many claiming strategies available, you should determine what’s best for you based on your age, life expectancy, income needs, and other retirement assets. A little bit of individualized planning may help you hit your golden year goals.

Our team is happy to help in this way. We use comprehensive financial planning software programs to model client-specific scenarios. Please contact us if you have questions so we can help you optimize your benefits. 

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