Are you planning on working while also taking your Social Security benefits?
What about even a part-time job or business?
If so, there are some major things that you need to know.
Working While Collecting Your Social Security
If you want the real summarized version of this topic then here it is: Your Social Security benefits may be reduced if you make enough money before your FRA (full retirement age).
Note: You can find your FRA here.
The long answer is that how your benefits will be reduced will depend on your age and how much you work.
The rules are different for these different periods of your life:
Before the year you hit your FRA
During the year you hit your FRA
After your FRA
This picture is a brief summary of how it works (w/ 2021 earnings limits).
Before Your FRA (Full Retirement Age)
If you are drawing benefits before your FRA then once you have more than $18,960 (In 2021) in earnings then your Social Security benefits will be reduced by a dollar for every two dollars you make over $18,960.
Note: Not all income counts in reducing your Social Security benefits. This is what the SSA says:
“When we figure out how much to deduct from your benefits, we count only the wages you make from your job or your net profit if you’re self-employed. We include bonuses, commissions, and vacation pay. We don’t count pensions, annuities, investment income, interest, veterans, or other government or military retirement benefits.”
So for example, if you make $200 dollars over the $18,960 limit then your Social Security benefits will be reduced by $100.
Year of Your FRA
During the year that you hit your FRA you will only receive a reduction to your Social Security benefits if you make more than $50,520 in the months before you hit your FRA. And if you do then your benefits will only be reduced by $1 for every $3 you make over that limit.
After Your FRA
Starting in the month of your FRA your benefits will no longer be reduced no matter how much you make.
Also, if your benefits had been reduced in previous years then it will be recalculated at your FRA to somewhat make up for those reductions.
What About In The Year I Retire?
But what about the year that you retire? If someone retires after 62 and starts Social Security right away then it is likely that they’ll have income from their job and Social Security income in the same year?
Will this cause a reduction to your benefits? Fortunately, it will not.
As long as you don’t start benefits until after you are done working then your Social Security benefits will not be reduced for any work you did in the months before you started your benefits.
Should I Start Social Security If I am Going to Keep Working?
The short answer is probably not. If you know that you are going to have income from a job or business then it probably makes sense to not take Social Security right away so that you don’t have to deal with the reductions.
This way you can also take advantage of increased benefits by delaying benefits and you don’t have to worry about getting your benefits reduced.
