#108 - Social Security Q&A: What You Need to Know About Work, Taxes, and Medicare

Eric Blake: Welcome to another episode of The Simply Retirement Podcast, where we want to educate and empower women to live your retirement on your terms. I'm your host, Eric Blake, practicing retirement planner for over 25 years, founder of Blake Wealth Management, and I would not be the man I am today without the women in my life.

Joining me again is Wendy McConnell. Wendy, how are you?

Wendy McConnell: I'm good. Thanks for including me.

Eric Blake: Absolutely. I'm glad you're here. So I have to confess, I'm on the pickleball disabled list.

Wendy McConnell: Oh no. What happened?

Eric Blake: So just a slight little tweak of the hamstring. I probably should have given it a little bit extra time, but it's one of those things.

And for me, what's bad is I always kind of pride myself on my mobility, doing the weights, all that kind of stuff, and I couldn't survive this one. It got me.

Wendy McConnell: You did it playing pickleball?

Eric Blake: I think so, yes. I kind of felt it last week, and then we went to see my grandmother for her birthday. Then I came back, and yeah, it wasn't quite, I didn't feel the twinge until I felt it.

Wendy McConnell: Yeah. Well, I pulled my hamstring last year. I was out for two...

Eric Blake: Yeah, I remember that.

Wendy McConnell: For two months I couldn't do a thing. But I did it working out, doing a kickboxing routine, so I've given up working out.

Eric Blake: Just stick with pickleball. That's good.

Wendy McConnell: Yeah. Well, I hope you get back to it sooner than two months.

Eric Blake: That's the hard part for me, saying, "Okay, I gotta give it time, gotta let it heal," all that good stuff. So hopefully I can make it here. I gotta probably give it a couple of weeks. We'll see.

Wendy McConnell: Yes. I have faith in you. I will keep reminding you to take it easy.

Eric Blake: That's good.

All right. So today I wanted to spend some time talking through a few of the most important questions that came out of a recent webinar we did, Savvy Social Security Planning for Women. And I want to go through the responses, but also talk about how they fit into the bigger retirement planning picture.

Because we had a number of really thoughtful questions that came in, both during the registration process and after, and during the webinar as well. I think there's a lot we can learn just by going through these.

And the goal is to give everybody a clear understanding of how these decisions work, help you think through these in your own situation, and also really, it always comes down to how can I help you ask the right questions? Because it's very hard to be an expert in all this.

I pride myself on being a quote-unquote expert, but even I have to look things up. So it's one of those situations where, again, it really comes down to asking the right questions, or who should I ask.

Wendy McConnell: Okay.

Eric Blake: And also, just don't forget, if you do have a question, a topic idea, or any type of retirement challenge that you're facing, please feel free to submit that at simplyretirementpodcast.com/askeric.

Also, at that website, you can sign up for our weekly email newsletter, which will allow you to stay up to date on our podcast episodes and information on future educational events like the webinar itself.

And if you really want some inside access, you can join our Simply Retirement Community Facebook group. We're actually now somewhere around 410 or 412 members, I think, of the group.

Later in the year, since we've grown as much as we have, I want to start doing some more member-only type events, some live Q&A sessions, and bring in some of the past podcast guests to do some more personalized events as well.

So we'll have a link to that in the show notes.

Wendy McConnell: Sounds good.

Eric Blake: Perfect.

All right. So I actually wanted to start with a couple of comments that I thought were really cool to see come in. They're not really questions, but more about learning and taking the time to start learning what's going on here.

One of the attendees said, "I don't have any questions yet. I'm just trying to get started learning all of this as I turn 63 this year."

So again, it's just about where do I start learning? How do I start understanding what my options are?

And then the second one was, "I'm going through a divorce. I haven't been involved in managing money or retirement for the past 20 years, but I know it's time to start learning."

And one of the biggest things I can say is just start. Start the process. Start somewhere. Start with a webinar. Start reading a book. Whatever it is that is your first step, start somewhere.

Because I think it's really understanding these are people, in some form, going through their own process of trying to understand, what are my options?

And I think that's really the thing that stood out to me about these comments and the reason I appreciate them so much. It's not about sitting and waiting until things happen. It's about being proactive and starting to learn.

Who do I ask? What do I ask? What are the right questions to be asking? Then moving forward from there.

Because you're not expected to know all this stuff.

Wendy McConnell: Because it's a lot.

Eric Blake: It is a lot.

We've done a number of episodes on spousal benefits, ex-spousal benefits, survivor benefits, and your own retirement benefits. It's very much like a puzzle, but sometimes you feel like you're missing pieces to the puzzle.

So how do I start finding those pieces, or who do I ask for guidance in making the most informed decision possible?

The other thing I was going to say is one of the things that's also come out of this, and some additional responses and feedback that I've gotten since the webinar, was women asking about, "Hey, can I do this?"

And really it's referring to strategies that are no longer available.

One of the things I wanted to do as a follow-up to this episode is actually do an episode talking about some of the changes that have happened. They're about 10 years old now, and some of the strategies that people still think are available because they may have heard it from a friend, a neighbor, or a coworker.

These strategies aren't actually available anymore, and I've gotten a couple of questions related to that.

So on the next episode, I want to clear up some of the confusion around what is now available and what are the things that used to be available that can no longer be implemented.

Wendy McConnell: Okay.

Eric Blake: All right. So let's get to our first question.

The first question was, "Can I take Social Security now and continue working full-time?"

Actually, the short answer is yes.

Wendy McConnell: Well, how old is the person?

Eric Blake: I don't know. It didn't say what the age was.

And so I want to cover some of the basics that you want to be aware of. Again, that's really where giving you the information you need helps you make an informed decision.

So short answer is yes. You can work anytime, regardless of how old you are. Actually, it depends on health and those types of things.

But the key thing to be aware of is if you're below full retirement age, which for most people now is going to be 67, there's something called an earnings test.

We've covered this on past episodes, so I'm just going to hit the basics here.

Basically, what that means is your benefit could temporarily be reduced if your income exceeds certain limits.

So for 2026, you can earn $24,480 without any reduction in benefits if you're more than one full year from your full retirement age.

If you earn above that, for every $2 you earn above that amount, you're going to have $1 in benefits reduced.

Wendy McConnell: Okay. But what does that do to the amount that we're taxed and how much we pay in Medicare and all of that kind of stuff? I'm sure you were going to cover it anyway.

Eric Blake: Actually, that's one of the questions we'll get to. But I think it's okay to talk about it here to an extent.

Again, that's why we really have to make our Social Security decisions not in a silo. We're not just looking at, okay, should I start Social Security today? Should I start Social Security a year from now?

It's looking at other factors. What is my tax situation? What are my other income sources? Do I need to work? Do I have to work? That's a big one. Or do I just want to work?

That's where we have to make some of these decisions. Again, it's looking at our overall picture more than just longevity. Unfortunately, Social Security on its own usually just comes down to longevity or cash flow. Do I need the money, or how long do I think I'm going to live?

Those are some of the questions where, if we just knew the answer, we would be all good, right?

Wendy McConnell: Things would be so much easier. That's right.

Eric Blake: I don't know how pleasant your life would be if you knew that.

Wendy McConnell: Right, yeah. If I only have 10 years left, I don't know how much...

Eric Blake: So when you do the pros and cons, that's the one pro, I know when to start Social Security.

There's a bunch of other cons, but that's the one pro, if I knew how much longer I had to live.

Wendy McConnell: Exactly.

Eric Blake: But that's really where you have to look at this as an overall picture.

I talk about that retirement income puzzle where we're putting pieces together. If you just look at that Social Security puzzle piece, you might make a mistake. You might impact other areas.

For example, I shared a story several episodes ago about a lady that had gotten divorced recently. She was 62 and said, "Okay, I'm on my own now. I'm making my own financial decisions, and I really would like to work."

But actually in that circumstance, it was also, "Well, I need cash flow. I need income."

Without realizing it, she not only started working, she started Social Security. She started receiving her ex-spousal benefit, which unfortunately, because of the amount she was earning, she didn't realize this earnings test was out there.

She was earning enough to where she was actually going to pay back most of her Social Security benefits, and she didn't realize that.

So that's really where, again, you've got to understand. It's the education piece.

They don't teach Social Security. As much as we're talking about improvements in the school system around teaching finances and balancing your checkbook, understanding some of these basic financial concepts, I don't know that Social Security is ever going to be one of those things they teach in high school.

So that's where even people who are in their 50s and 60s struggle with these decisions and understanding what their options are.

That's really where it comes down to educating yourself as best you can and knowing the right questions to ask. And this is one of those questions. If I start Social Security, should I or could I continue to work full-time?

Wendy McConnell: Right.

Eric Blake: So the next question was, "If I take Social Security while still working, how will my benefits be taxed when filing jointly with my spouse?"

This actually kind of gets to your question as well.

I'm going to refer to Episode 54, where I did a deep dive on how Social Security gets taxed.

That's where you have to start looking at, what is my projected Social Security benefit going to be between the two of us? Depending on whether both spouses are starting or not, and whether both spouses are continuing to work.

And back to the original question, are you below full retirement age? Are you going to be subject to that earnings test?

Wendy McConnell: Okay.

Eric Blake: Let's assume they're full retirement age or older, so we're not worried about the earnings test. We're just worried about taxes.

Wendy McConnell: Okay.

Eric Blake: In this case, we start looking at something called provisional income.

That is basically all your income sources, whether it's employment income, IRA distributions, or whatever other income sources you have, plus half of your Social Security.

You also have to add in what's called tax-exempt interest. Think municipal money markets or municipal bond funds.

You actually have to add that in. So it's quote-unquote tax free for federal purposes, but it counts toward determining your provisional income.

Once you know your provisional income, that will determine how much of your Social Security is going to be taxed, or considered taxable income.

At a maximum, up to 85% of your Social Security benefit can be considered taxable income.

If your income is high enough, and if you're both still working, there's a pretty good chance you're going to be at that maximum level unless you're just doing some part-time work to stay busy.

So up to 85% of your benefit could be considered taxable income, which goes on top of all the other income you already have.

If you're working, you're going to add 85% of your Social Security benefit to your employment income.

Wendy McConnell: Oh my gosh. Just stop working.

Eric Blake: Hi, everyone. It's Eric. I hope you're enjoying today's episode.

I want to take just a quick moment to share a resource I think you'll find really valuable.

If you've ever asked yourself, "How much is my Social Security reduced if I file early?" or "Am I eligible for benefits as a spouse, surviving spouse, or even after divorce?" you're not alone.

That's why we created our Ultimate Guide to Women's Social Security Success.

It includes six of our most popular Social Security guides and checklists for women.

Inside, you'll find a 2026 quick reference guide with key Social Security amounts and limits to be aware of, along with five additional guides and checklists to help you make more informed decisions about eligibility and filing strategies.

You can download it for free at womenssocialsecurityguide.com.

Keep it handy wherever you may be in the decision-making process.

Now back to the episode.

That's the other piece you would look at when considering these decisions. What tax bracket am I in just working, and how would additional Social Security income impact that?

Would it push me into a higher tax bracket? Could it move me from the 12% tax bracket up to the 22% bracket or even higher?

Wendy McConnell: That would not be good.

Eric Blake: That's really where the planning becomes so important. Understanding what your situation is.

What is my salary? What are my Social Security benefits going to look like? How does all that add up?

Then make a decision based on that.

Wendy McConnell: Okay.

Eric Blake: And again, just as a reminder, Episode 54 is where we went into a deep dive on provisional income and some of the decisions you can make today that may impact your future tax situation as well.

All right. Let me go to the next question.

What is the best age to start Social Security?

Unfortunately, this kind of gets back to the joke we just made about longevity and knowing how much longer we have.

If we knew that, this question would be really easy to answer.

Wendy McConnell: Right. If we're going to live until 95, wait.

Eric Blake: Yes, absolutely.

So obviously there's no single best age for everyone. It just doesn't exist.

I want to talk through some of the key factors to consider.

First is marital status.

We do want to look at that because in most cases, the higher earner's benefit will impact the surviving spouse.

If you've got two spouses and one is a higher earner and one is a lower earner, whichever one has the higher benefit is the one that's going to continue as the survivor benefit.

And based on statistics, that surviving spouse is most likely going to be the wife.

So it's important to be aware of those factors and also look at your cash flow needs and those types of things.

Next is income needs.

Depending on what your income sources are, do I have IRA or investment assets that I can draw from that would allow me to delay my Social Security benefit? Or is Social Security going to be my key source of income, my sole or primary source of income?

We also just talked about this. If you're still working, how does that impact my potential reduction of benefits if I have not reached full retirement age yet?

That's really where the earnings test comes into play.

A lot of people don't like the earnings test, but basically what it's designed to do is encourage people to wait until their full retirement age to start Social Security.

Because once you've reached full retirement age, that is the age where you can work, earn as much as you need to or want to, and not have it impact your Social Security benefits.

Wendy McConnell: Okay. Well, I don't want to pay taxes, so...

Eric Blake: Every time we have a conversation about taxes, you always say that you don't want to pay taxes.

Wendy McConnell: You say people don't like the earnings test. I don't like taxes.

Eric Blake: But I do think longevity does matter, especially for women. That's really where it's looking at your specific situation.

Even if the wife is the lower earner, or even if the wife is the higher earner, that needs to be taken into consideration.

It's saying, okay, if we're looking at income and cash flow needs, it is possible that one spouse starts sooner than the other.

Again, that comes down to evaluating what are my other sources of income, how long do I want to work, how long do I plan to work, and then making those decisions without just looking at it strictly from an age perspective.

That's where all these pieces start to come together.

And again, there's no perfect answer. It's just about understanding your options and making a thoughtful decision.

Wendy McConnell: Which we can do.

Eric Blake: Hopefully, yes.

Wendy McConnell: Yes.

Eric Blake: Now, this actually gets to what I mentioned earlier when you asked the question about things like Medicare premiums.

This question was, "If I plan to take Social Security at age 70, do I need to stop working beforehand to avoid RMDs or higher Medicare costs?"

I want to break that down a little bit.

First, you do not need to stop working to claim Social Security at age 70.

I think what she's referring to is, "If my income is too high, could I be subject to higher Medicare premiums?" Or what's called an IRMAA surcharge.

That's basically an additional premium that you would pay above the base premium for Medicare Part B and potentially Part D, depending on which options you choose.

The tricky part is that your Medicare premium this year, the current year, is based on your tax return from two years ago.

For example, while we're recording this in 2026, your Medicare premium for 2026 would be based on your 2024 tax return.

It's always two years behind.

One of the things I always say is, if you can work, want to work, or need to work, then work, regardless of whether you've started Social Security.

You might have to adjust because life happens.

You might have started Social Security because you lost a job, and now you've found another job and you're able to work and earn what you need to.

Even though it might impact your Social Security benefits, it could allow you to delay withdrawing money from your retirement accounts.

There are reasons why you may still want to continue working.

The other part is remembering that if you do have benefits reduced because of the earnings test, that money is not lost forever.

It gets recalculated into your full retirement age benefit and then increases that benefit by some amount.

The money still gets paid to you at some point, so you're not losing the money.

Wendy McConnell: I think a lot of people don't know that part.

Eric Blake: Right.

People feel like it's lost forever.

That's why it is an important decision, but I don't know that it's as important as most people think to the point of saying, "I'm going to choose not to work simply because I don't want to lose benefits."

Wendy McConnell: Mm-hmm.

Eric Blake: That's where the education piece becomes that much more important.

For her, if she's planning to start Social Security at age 70, and again we don't have an exact age, we'll assume she's a couple of years younger than that.

The year she turns 70, if she's 68 today, her Medicare premiums at age 70 are going to be based on her age 68 tax year.

So two years behind.

It's a good question, but it's not a question where I would say, "Stop working because of that."

Here's the tricky part.

The question says she wants to start Social Security at 70, but it doesn't necessarily say she's going to stop working at 70.

That would be something important to know.

If she's going to start Social Security at 70, is she actually retiring at 70?

Because even if you're subject to IRMAA and higher Medicare premiums based on your tax return from two years ago, if you retire and have a reduction in income, you have the opportunity to file for a waiver of those additional premiums.

You do that through SSA Form 44, or Form SSA-44.

Basically you're saying, "If I retire and my income drops, I want Medicare to consider my current income rather than my income from two years ago."

Wendy McConnell: Okay. So say I'm going to retire at 67.

Eric Blake: Mm-hmm.

Wendy McConnell: So the first year I start taking Medicare would be 67.

Eric Blake: Potentially. Now you're eligible at 65.

Wendy McConnell: Let's pretend it is.

Eric Blake: Okay.

Wendy McConnell: So they're going to base it on how much money I was making at 65 when I'm still working, so it's automatically going to be higher than it should be for the first couple of years.

Eric Blake: Right.

So when you file, you're going to get a notice that says because you had higher income, you're going to have to pay a higher Medicare premium.

Wendy McConnell: Right. And this is when you can use the exception?

Eric Blake: Exactly.

You file SSA-44, and there are about seven or eight different reasons that allow you to request a waiver of those higher premiums.

What you're doing is saying, "Hey, I'm no longer working. I don't want you to base it off my income two years ago. I want you to base it on my income now."

Wendy McConnell: Yes.

Eric Blake: You actually have to provide an estimate of what your income is going to be for the current year.

One of the interesting things is the form doesn't list retirement. It says reduction of income due to loss of employment.

Wendy McConnell: Well, that's the same thing, right?

Eric Blake: It is, but it would be much easier if it just said, "Hey, I retired."

Wendy McConnell: They're not going to make it easy. You of all people know that.

Eric Blake: I absolutely know that.

So that would address your question on IRMAA surcharges and higher Medicare premiums.

You don't necessarily need to stop working today in order to avoid that because if your intent is to retire at 70 and start Social Security, you may have that option of requesting a waiver of those higher Medicare premiums.

Wendy McConnell: Got it.

Eric Blake: Now, the question about RMDs is a little more tricky, depending on when she plans to retire.

With the SECURE Act, we're now looking at RMD ages that have changed over time. It used to be age 70½ forever. Then it became 72 under the original SECURE Act. Now it's either 73 or 75 under SECURE Act 2.0, depending on your year of birth.

Basically, if you were born before 1960, your RMD age is 73. If you were born in 1960 or later, your RMD age is 75.

Working itself doesn't initially impact that.

What does potentially impact it, and gets back to her concern about Medicare premiums, is saying, "Okay, if I have to start taking money out of my retirement accounts because I'm subject to RMDs, and I've got Social Security, where is that going to put my income?"

That's a little more complicated when it comes to navigating higher Medicare premiums.

If I have to start taking money out, I don't get to request a waiver because Uncle Sam is telling me I have to take money out of my retirement accounts.

Work is different. If I stop working, that's one of the exceptions. Having to take money out of your retirement accounts is not.

That's where you have to do some advance planning and say, "Okay, what are my projected RMDs, and is there anything I should be doing now?"

Maybe I start taking some money out of those retirement accounts sooner rather than later. Maybe I think about Roth conversions.

What would make this much easier is if we knew her actual retirement plan around this.

One of the other things to be aware of is that maybe she continues to work. Maybe she wants to work until age 75.

As long as the money is still in her current employer's retirement plan, she may actually be able to delay those required distributions until she officially retires.

So that's something else to consider.

Wendy McConnell: I like that.

Eric Blake: But again, the RMDs and higher potential Medicare premiums are not necessarily a reason to stop working now.

They're simply another factor to consider as part of your overall retirement plan.

Wendy McConnell: Okay.

Eric Blake: All right. Well, those are the questions we had.

I thought they were good questions to talk through because they give you some things to think about in relation to your own situation.

If you're not really to the point of saying, "Hey, I don't have these questions. I don't have these detailed questions because I'm not far enough along," just remember what those original comments said.

Start the education process.

Join webinars. Find books. Do anything that will help you become more educated.

Especially if you haven't been in a position of making these decisions, or even if you were making these decisions with a spouse and now you're not.

That can be challenging too, saying, "We were making these decisions together, but now it's just on me."

That's why education is so important.

When you step back and look at all these questions, a few themes really stood out.

Obviously, and we've talked about this, Social Security is not just one decision because it connects to your income, your taxes, your work, and your long-term plan.

There really is no right answer for everyone, but there is what I would call a right process.

Start by learning.

Be proactive.

Understand what your options are.

Take each step one by one.

Start somewhere.

Get yourself educated.

Ask for help when it's needed.

A lot of times it simply comes down to, "Am I asking the right questions?"

Wendy McConnell: Mm-hmm.

Eric Blake: Any other thoughts, clarifications, or anything we need to go back over?

Wendy McConnell: No. I'm just as confused as ever.

No, no. Actually, I didn't even get credit for asking the right question in the beginning, which was how old she was.

I mean, come on.

Eric Blake: Well, yeah. Your questions are always in advance.

You always jump the gun on my questions. That's the problem.

Wendy McConnell: I know. I'm impatient. Sorry about that.

But no, I'm good today.

Eric Blake: That's all right.

Wendy McConnell: You're curious. That's a good thing.

Eric Blake: It is.

And I'll come back to that.

You're actually the best example of being willing to ask the question.

Wendy McConnell: Yeah.

Eric Blake: Sometimes that's the biggest first step you can take, just being willing to ask the question.

You may not know who to ask. It may not even be the right question.

But ask.

Wendy McConnell: And I never stop.

Eric Blake: Well, awesome.

As always, thank you, everybody, for tuning in.

Thank you, Wendy, for being here with me once again.

If you're looking for a personalized retirement plan that helps you make smart decisions around Social Security, income, investments, and taxes, you can visit getmysimplyretirementroadmap.com to schedule a call with our team.

If you missed the Social Security Planning for Women webinar, we're going to include a link to the replay in the show notes so you can watch that anytime you would like.

That's it for today's episode.

For all the links and resources mentioned, you can visit thesimplyretirementpodcast.com.

Don't forget to like, follow, and share the show.

And until next time, please remember, retirement is not the end of the road. It's the start of a new journey.