Social Security Benefits

In retirement, up to 85% of your Social Security benefits may be taxed, depending on your income level. You will be affected if your modified adjusted gross income (AGI plus half of Social Security benefits plus tax-exempt income) exceeds $32,000 ($25,000 if you're single).

The government has raised the age at which Americans may start collecting Social Security benefits. Full retirement age will increase gradually for those born after 1937 from age 65 to age 67. Early retirement at age 62 is still possible, but your monthly benefit will be reduced.

Taking benefits at age 62 may be tempting, even with the reduced benefit. However, if you choose to continue working to supplement your Social Security income, your benefits may be reduced further if you earn more than the maximum amount allowed. If you are under the full retirement age, receive Social Security benefits, and earn additional income in 2009, your benefits would be reduced by $1 for each $2 earned over $14,160. If you reach full retirement age in 2009, the limit is $37,680 for months prior to attainment. Upon reaching full retirement age, Social Security benefits are not reduced because of earnings.

The Social Security Administration offers online calculators to help you plan your retirement sources of income. For more information, visit their website at www.ssa.gov.