I also have a question.
If I am living off of the interest from investments right now, and those investments bring in more than the minimum allowable earned income, and I choose to start drawing my SS at 62, will I be taxed on the income from my investments in the same way that I would if I were working and drawing SS?

I don't believe that interest received from investments is considered EARNED income.

I have been drawing interest on my investments for 15years and have had to pay taxes on the interest every year..plus my SS.

Hi P&F,

Interest and dividens are taxble income, unless tax exempt, but neither are earned income.

While drawing SS and MFJ, then you have to receive about 16000 in taxable interest and dividens before part of SS becomes taxable.

16k is just a easy number for me to remember but it's slighty more than 16k.

Sentimental Journey, your question appears to mix two rules of social security.

First, Earned Income. Earned Income (i.e. a job, pay for work) affects your social security draw while you are younger than full retirement age. They reduce your Social Security payment by $1 for every $2 you earn ABOVE a set limit. For 2008 the limit is 13560. The set limits change during the year you will reach your full retirement age - 36,120 for 2008.

Now taxes are different. Dividends and Interest are not considered Earned Income. They are taxable income (unless tax-exempt).
As such, they are used to determine which portion of social security income is taxable. There is a social security benefits worksheet that determines the taxable portion. You can find this worksheet at www dot socialsecurity dot gov.