At 73 and Still Working Full Time, Can You Avoid Social Security Taxes?

A 73-year-old worker who earns more weekly income than at any previous point in their career is raising a question many older Americans face: is there any legal way to avoid paying federal income taxes on Social Security benefits while still collecting a paycheck?

The concern is well-founded. Social Security benefits become partially taxable once a recipient's "combined income" — a calculation that includes adjusted gross income, nontaxable interest, and half of Social Security benefits — exceeds certain IRS thresholds. For a single filer, up to 50% of benefits can be taxed above $25,000 in combined income, and up to 85% above $34,000. Continuing to work full time at a higher salary pushes that combined income figure higher, potentially exposing more benefits to taxation.

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Financial planners generally note that while there is no simple escape hatch, strategic moves can reduce the tax bite. These may include maximizing pre-tax retirement contributions to lower adjusted gross income, timing Roth conversions carefully, or managing investment income to stay beneath key thresholds — though each approach carries its own trade-offs and suitability depends on individual circumstances.

The worker's worry about an "unexpected tax bill" also highlights a common pitfall: many retirees and working seniors fail to have sufficient federal income tax withheld from either their paychecks or Social Security payments, which can lead to a surprise liability come April. Requesting voluntary withholding from the Social Security Administration or adjusting W-4 withholding at work are practical first steps to avoid that outcome.

For older Americans navigating the intersection of wages, retirement benefits, and the tax code, the situation underscores the value of proactive planning rather than reactive scrambling at tax time. Continue reading at MarketWatch.com