Episode 224: The Difference Between a Social Security Tax and a Penalty (And How to Avoid Them Both)

David starts the conversation by describing the difference between a Social Security tax and a Social Security penalty - and whether it's possible to avoid them both. David explains that although some people use them interchangeably, a Social Security tax is different than a penalty. The first step to protecting your Social Security is understanding the main drivers behind taxes and penalties. The Social Security penalty arises when you begin drawing from your account before your full retirement age while also earning above the minimum allowed threshold. David shares how the Social Security penalty works and how the damages can affect your retirement. David breaks down the minimum allowed income threshold and what the IRS counts as earnings. According to David, understanding the IRS's views on provisional income is the best way to learn how Social Security taxation works. David highlights the unexpected income streams the IRS counts as provisional income - some of which might shock you...