If you claim Social Security and continue to work, your monthly benefits could be reduced or withheld from you entirely.

This happens for those who are working and under their full retirement age.

But now that it’s 2021, if you work and claim Social Security, you may be able to keep more of what you make this year, and in future years. That’s because they’re increasing the dollar amount that you can earn without it affecting your monthly benefit. 

In this post, we’re going to go over:

• how the Retirement Earnings Test affects your benefits,
• what’s changing in 2021, and
• what to do if your earnings are reduced.

Please remember that your specific situation is unique because you’re unique. You should meet with a financial professional before making any decisions. The information I’m providing here is just to help you get started. As you evaluate the possible next steps, if you don’t have a financial professional, I’d be happy to step in. Click here to set up a time to have a free planning call with me. 

When you claim social security before your FRA (full retirement age) and you continue to work, your benefits run through a Retirement Earnings Test. If you’re under FRA through all of 2021, that earnings limit under wage or income is $18,960 per year. So, if you make less than that, your Social Security benefits should not be reduced. But if you earn over $18,960, your Social Security income could be reduced by $1 for every $2 that you make, over that amount. 

But here’s the good news: if you’re going to reach your FRA in 2021, your earnings limit to that wage number could be $50,520. That’s quite a big jump in how much you can earn this year without seeing it reduced. And if you do go over that 50k number, then for every $3 you earn over that limit, Social Security income will be reduced by $1. 

What happens if your benefits are reduced?

The good news here is that benefits won’t be permanently reduced. And when you do reach your full retirement age, then the Social Security Administration will recalculate your benefit. At that time you’ll start receiving larger checks. (This is something that you should really take on yourself though, to make sure that it’s happening.) And as a reminder, your Social Security benefits are not reduced when you are at your full retirement age, no matter what you’re earning from your work. Once you reach FRA, you don’t get penalized and you don’t get that earnings test.

If you’re at your full retirement age, there’s no limit and you still receive your full Social Security benefit at that time. And what we’ve seen from evaluating many different Social Security strategies for clients, is that it doesn’t make much sense to claim Social Security before your full retirement age if you know that you’re going to be earning an income above those numbers that we talked about. 

But as always, consult with your planner and figure out what’s best for you. And if you want a little more information, click here for a “How Much Do I Need To Retire” quiz, since Social Security plays a big role in that equation.