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Dear Jon: Plan on surtaxes for early Social Security draw

The government will dock you up to 50% prior to full retirement age

Karen emailed me and was fit to be tied. She asked, "Dear Jon, why does Social Security penalize me when I take early retirement? It's hard to make ends meet as it is!" There's a whole class of "baby boomers" in this boat and it leaves them scratching their heads.

I can sympathize with Karen on this question. You work all your life and circumstances force you to take early retirement at 62, but your full retirement isn't until age 66. So to make ends meet, you go find a job only to find out that if you earn over $15,480 for 2014 you'll have to pay back 50 percent of your earned income above that. Ouch!

So why does the federal government do that? First of all, it's the way the law is designed. To change the law would take an act of Congress.

Second, Social Security is meant to partly replace lost earnings due to retirement, disability or death. Not wholly replace earnings.

If you reach full retirement age this year, you can earn up to $40,400 before Uncle Sam will deduct one third of your earnings. After one reaches full retirement age, there's no surtax on earnings.

If you return to work after you start receiving benefits, you may be able to receive a higher benefit based on those earnings. Social Security automatically re-computes your benefit amount after they credit additional earnings to your record.

The bottom line: Times are hard and choices are personal as to when to begin drawing on Social Security. If you choose early retirement and start to draw on Social Security, plan on less than full benefits and earnings limits and surtaxes on earnings above those limits.

It's the law right now.

If you have a question for me, send an email to the link above and you can message me on Facebook "JonKBrent KIONKCOY" or Twitter "DearJonKBrent"

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