In this post, we’re going to look at the pros and cons of working while collecting Social Security. Thought it’s not the best plan for everyone, there might be some instances where it could make sense for you.
Social Security usually considers full retirement age to be around 66 or 67. But if you’re around five years out and you are working and earning an income, and if you make over $18,960, then social security is going to deduct $1 for every $2 that you make over that amount of $18,960.
For example, if you make $28,960 ($10,000 over), divide that overage by 2 to see the deduction. In this case, $10,000 divided by 2 is $5,000. So, the Social Security Administration would be deducting $5,000 from your total benefits that year.
Know When Your Earnings Limit Goes Up
Be aware that in the year you reach your full retirement age, the earnings limit actually goes up to $50,520. As long as you earn less than that amount, then you shouldn’t have anything deducted from your pay. The SSA only counts your earnings up to the month before you reach your full retirement age, not earnings for the entire year.
Another thing to keep in mind when you’re looking at these calculations: once you do reach your FRA (full retirement age), you can earn whatever you want and you don’t have to worry about Social Security deducting.
Working Before Your Full Retirement Age
However, what if you retire at 63 and then go back to work at 64 with a salary over the aforementioned $18,960? What should you do?
Social Security says that the benefits they deduct are not lost forever. They also say that they will reconcile your benefits once you get to your full retirement age. However, we’ve seen the calculations that they use and it’s difficult to verify they’re actually paying you the right amount. It’s possible, but it’s just not a hundred percent clear. Every time we’ve tried to verify for a client, we really just have to take their word for it. And if you know anything about Social Security, you know that you don’t always get the same answer from two people in the same office.
For these reasons, I encourage people who are thinking that they might have a chance of working before they get to full retirement age, even if they already are retired, if there’s a small chance they might go back, I encourage waiting. But don’t just listen to me. Talk to your retirement planner and create your income plan. See what Social Security strategies make the most sense for you. If you don’t have a planner who specializes in retirement, reach out to me by clicking the link here.