Hi and welcome to Just Answer!If you will receive social security benefits and will have other taxable income - your social security benefits will be partly taxable. The simple test is - take half of your social security benefits plus other taxable income (wages, self-employment income, interest in the bank, etc) - if the total is below $25,000 for single or $32,000 for married couples filing jointly - none of your social security benefits are taxable. If the total is above the threshold - part of your social security benefits is added to your other taxable income.Because you will retire before the full retirement age which is 66 - your social security benefits will be reduced. As you will retire at age 65 + 6 months - your benefits will be 96.7% compare what you would get if retire at 66 - see here - http://www.ssa.gov/retirement/1943.html
Because you will reach full retirement age in 2011, you are considered retired in any month that your earnings are $3,140 or less and you did not perform substantial services in self employment.
"Substantial services in self-employment" means that you devote more than 45 hours a month to the business or between 15 and 45 hours to a business in a highly skilled occupation.If you will be an employee and after you will start your social security benefits your earnings will be less than $3,140 in any month - your social security benefits will not be reduced.
I wasn't as concerned about taxable income as I was partial benefits because I will still be working full time.
I covered all issues that might affect your benefits. I hope the information above will help you to make the best choice.
Please be aware that if you apply in January of 2012 - the IRS might not provide information about your earnings in 2011 by that time - and you need to attach W2 form to your application.
Let me know if you need any help or clarification.