Wednesday, August 17, 2022

Can You Draw Social Security And Still Work

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How To Get The Maximum Social Security Benefit

ð´ Earnings Limits If I Work and Collect Social Security

Your Social Security retirement benefits are based on a combination of when you are taking benefits and your earning history. Waiting until age 70 will give you the largest monthly Social Security benefit. For 2021, the maximum Social Security benefit at age 70 is just $3,895 per month or $46,740 per year. This amount can increase with the Social Security cost-of-living adjustment , set to 5.9% for 2022.

Does Social Security Make Exceptions To The Sga Limit

Some argue that the monthly SGA earnings limit is an arbitrary amount with no real basis and is unfair, and to some extent that is true. For instance, someone making the federal minimum wage can work 32 hours per week and have their earnings come under the SGA amount, while someone who makes significantly more can work only five hours per week without becoming ineligible for benefits.

In actuality, Social Security can look at things that affect the “worth” of an individual’s work that might influence whether or not an individual is engaging in SGA-level work activity, even if the individual is earning over the monthly earnings limit. For example, Social Security claims representatives must investigate whether an individual is performing work activity that is actually worth what they are being paid. They must consider the fact that some employers will subsidize disabled employees’ work by paying them their full wage even though the employees are not performing up to the value of that wage because of their disability. If an employer considers an employee’s work to be worth half of the actual pay, then Social Security could just count half the amount of earnings toward the SGA determination.

How Much Can I Earn While Collecting Social Security

You can earn as much as you want while collecting Social Security, but you may incur extra taxes or otherwise affect your benefit amount if you have too much income. In 2020, you could earn up to $18,240 before affecting your benefits, and in 2021, up to $18,960. In 2022, your benefits won’t be affected until you earn up to $19,560.

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What To Consider Before Filing For Social Security

A larger benefit check sounds great, but there are tradeoffs, and soon-to-retire folks should consider multiple issues before they decide one way or the other on when to file. If you really want to consider all the avenues, then youll have to think about your finances and longevity two issues that people have a hard time grappling with.

But heres the key trade-off: you can file early and take a reduced benefit, expecting that a shorter life span will mean you receive more now, or you could file at full retirement age or later and claim a bigger check, and eventually live long enough to claim more than the first approach.

Social Security is like longevity insurance, says Brent Neiser, a Certified Financial Planner and former chair of the Consumer Advisory Board at the Consumer Financial Protection Bureau. Its a stream of payments that will not stop throughout your life, so delaying your benefits to keep those payments as large as possible forms a helpful base to your retirement plan.

Neiser urges those who have not saved enough for retirement to use whatever means possible to postpone their Social Security benefits until after their full retirement age to help boost their future income.

You can use personal savings to help bridge the gap, but ideally you should plan to work a little longer , Neiser says.

How To I Know If I Get Ssi Or Ssdi

Can You Work And Still Collect Social Security Benefits?

There are couple of ways you will know if you get SSI or SSDI. For example, if you at one point could work, but you can no longer work anymore because of a disability or a serious ailment like cancer, you will most likely get SSDI.

That is because SSDI eligibility is based on the severity of your disability and if you have enough work credits through your own employment.

The way you know if you will get SSI, is that if you have a disability or a serious ailment and with limited or no income and resources.

If you have very little income and resources, plus you get a low monthly payment from SSDI, there is a chance that you can qualify for SSI as well. To which you will be able to receive concurrent disability benefits from the SSA.

Recommended Reading: When To Get Social Security

Spouses And Social Security

You can claim Social Security benefits based on your spouse’s work record. If claiming spousal benefits provides more, claiming before your FRA on a spouse’s record means you’ll lose even more than claiming on your own recordthe benefit reduction for a spouse is up to 35% while the reduction for claiming your own benefit is up to 30%. For instance, if you’re the spouse of Colleen in the above example and you are the same age, you’d be eligible for only $650 a month at age 6235% less than the $1000 a month you would get at your FRA of 67.

Not married? Read Viewpoints on Fidelity.com: Social Security tips for singles

Your decision to take benefits early could outlive you. If you were to die before your spouse, they would be eligible to receive your monthly amount as a survivor benefitif it’s higher than their own amount. But if you take your benefits early, say at age 62 versus waiting until age 70, your spouse’s survivor Social Security benefit could be up to 30% less for the remainder of their lifetime.

Choosing When To Retire

Retirement age is when an employee chooses to retire. Most businesses dont set an age that their employees must retire at. If an employee chooses to work longer they cant be discriminated against. However, some employers can set an age that employees must retire at if they can clearly justify it.

Its an employees responsibility to discuss when and how to retire with their employer. This could include phasing retirement by working flexibly. Members of occupational pension schemes need to discuss with their pension scheme managers what impact a change in working hours or income might have on the pension, whether the scheme supports phased retirement or working beyond the schemes normal pension age.

Employers may or may not be able to agree requests. If an employee is unhappy with their employers decision, they can challenge this at an employment tribunal.

Retirement is a form of resignation – employers and employees must follow the right procedures for this.

Also Check: Social Security Benefits For 2020

Congress Must Act Sooner Rather Than Later

In theory, the AWI problem could be fixed anytime before 2022, when, for example, workers who turn 60 this year are first eligible to retire at the age of 62. But that delay would cause significant anxiety for these workers, whose future benefits would be at risk. Moreover, people decide when to retire based on projections of their incomes in their initial year of retirement and in the remainder of their lives. It would be most unfair to workers decision-making processes to have the expectations of their future incomes be uncertain for some period of time while they are trying to make such an important decision.

Congress needs to act sooner rather than later to ameliorate this problem. One possibility would be to include a fix in the stimulus legislation to cope with the economic effects of the COVID-19 pandemic that Congress is currently considering.

When Should You Start Collecting Social Security Benefits

Collecting Social Security after 67 How They Feel About It Now

To determine when you should start taking your benefits, its important to understand how much your check is affected by when you claim your benefit. As mentioned before, you can claim your benefit as early as age 62, but reaching full retirement age can secure your full benefit.

So when exactly is full retirement age? That depends on when you were born.

Year of birth
65 + 2 months for each year past 1937
1943-1954
66 + 2 months for each year past 1954
1960 and later67

While the full retirement age used to be 65, changes to the program have increased that age. For example, those born in 1955 now have to wait an extra two months beyond age 66 to claim their full benefit. Someone born in 1959, for example, would have to wait until age 66 and 10 months to get the full benefit. Anyone born in 1960 or later, receives their full benefit at 67.

But some retirees choose to wait even longer. You may wait until as late as age 70 to claim your benefit, but then you must take it. Youll receive a bigger check for doing so.

So what is the upside to delaying your Social Security benefit after age 62? Your check wont get hit by a serious benefit reduction. Heres how much a $1,000 monthly check will become if you claim your benefit as soon as youre eligible at age 62.

Year of birthIf you file at 62, benefit reduced by:A $1,000 check becomes
$700

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Limits On Earned Income If Claiming Early Benefits

Until you reach full retirement age, Social Security will subtract money from your retirement check if you exceed a certain amount of earned income for the year. For the year 2021, this limit on earned income is $18,960 . The amount goes up each year. If you are collecting Social Security retirement benefits before full retirement age, your benefits are reduced by $1 for every $2 you earn over the limit. Once you reach full retirement age, there is no limit on the amount of money you may earn and still receive your full Social Security retirement benefit.

Example

Henry is considering claiming early retirement benefits this year, at age 64. Social Security calculates that if he does so, he’ll receive $866 a month . But Henry also intends to continue working part-time, with an income that will be about $5,000 over the yearly limit on earned income. If he does claim the early benefits and makes that part-time income each month, Henry would lose one dollar out of two from the $5,000 he earns over the limit, which means $2,500 for the year. So, by claiming early retirement and continuing to earn over the limit, Henry incurs a double penalty: His retirement benefits are permanently reduced by 13%, and he loses an additional amount every month to the extent he earns over the income limit.

Social Security does not reduce each monthly check by a small amount, unfortunately. Instead, the agency may withhold several months’ entire checks until the reduction is paid off.

Whats Your Social Security Break

If youre looking to maximize your total lifetime Social Security payout, youll want to conduct a break-even analysis to determine when you should start drawing your benefits.

Your break-even age occurs when the total value of higher benefits starts to exceed the total value of lower benefits .

For example, if you are eligible to collect a reduced $900 benefit at age 62 plus 1 month, and your benefit would increase to $1,251 at age 65 and 10 months, your estimated break-even age is 75 years and 5 months.

If you expect to live beyond that age, it could make financial sense to delay drawing benefits. The Social Security Administrations life expectancy calculator can help you decide.

When it comes to calculating a start date for Social Security benefits, however, theres not an age thats appropriate for everyone. Consider your own financial needs, health and other retirement plans before making the call. If you cant reasonably afford to live without taking benefits, it may make little sense to delay taking your benefit.

Read Also: Social Security Retirement Amount

Costs Of The Solution

Two issues that are likely to arise in any discussion of fixing this problem are its cost to the Social Security trust fund and its cost to the federal budget. With regard to the cost to the Social Security trust fund, there are three ways to look at the issue.

One way is to view the cost relative to costs in a world in which no pandemic had occurred. For example, the cost could be measured using the economic assumptions in the most recent Social Security trustees report , which were formulated before the pandemic began. From this perspective, the cost would be zero because the legislative change would restore the world of Social Security benefits to what it would have looked like had there been no pandemic.

A second way of looking at the issue is to view the cost of the change relative to costs in a world that reflected economic assumptions indicative of the economic recession caused by the pandemic. From this viewpoint, there would be a cost associated with fixing the problem. For example, the chief actuary of the SSA estimates that if the AWI in 2020 were to fall 5.9 percent below its 2019 level, the AWI adjustments proposed by Chairman Larson would cost $90 billion in present-value dollars for the 75-year period from 2020 through 2094about 0.02 percent of taxable payroll over that period. . The cost over the 10-year period from 2020 to 2029 would be about $21 billion in nominal dollars.

You Can Undo A Social Security Benefits Claiming Decision

Can You Still Work Full

There aren’t many times in life you can take a mulligan. But Social Security offers you the chance for a do-over. Let’s say you claimed your benefit, but regretted the decision and wished you had waited. Within the first 12 months of claiming Social Security benefits, you can withdraw the application. You will need to pay back all the benefits you received, including any spousal benefits based on your record. But you can later restart your Social Security benefits at the higher amount youll earn by waiting.

Early claimers have another opportunity for a do-over: They can choose to suspend their Social Security benefit at full retirement age. Say you took your benefit at age 62. Once you turn full retirement age, you can suspend your benefit. You don’t have to pay back what you have received, and your benefit will earn delayed retirement credits of 8% a year. Wait to restart your benefit at age 70, and your monthly payment will get up to a 32% boost — which could erase much of the reduction from claiming early.

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You Can Claim Social Security Benefits Earned By Your Ex

Just because you’re divorced doesn’t mean you’ve lost the ability to get a Social Security benefit based on your former spouse’s earnings. You can receive a benefit based on his or her record instead of a benefit based on your own work record if you were married at least 10 years, you are 62 or older, and you are single.

Like a regular spousal benefit, you can get up to 50% of an ex-spouse’s benefit — less if you claim before full retirement age. And the beauty of it is that your ex never needs to know because you apply for the benefit directly through the Social Security Administration. Taking a benefit on your ex-spouse’s record has no effect on his or her benefit or the benefit of your ex’s new spouse. And unlike a regular spousal benefit, if your ex qualifies for benefits but has yet to apply, you can still start collecting Social Security based on the ex’s record, though you must have been divorced for at least two years.

Note: Ex-spouses can also take a survivor benefit if their ex died after the divorce, and, like any survivor benefit, it will be worth up to 100% of what the ex-spouse received. If you remarry after age 60, you are still eligible for the survivor benefit.

A claiming strategy if youre divorced: Exes at full retirement age who were born on January 1, 1954, or earlier can apply to restrict their application to a spousal benefit while letting their own benefit grow.

What If I Delay Taking My Benefits

If you retire sometime between your full retirement age and age 70, you typically earn a “delayed retirement” credit . For example, say you were born in 1955 and your full retirement age is 66 and 2 months. If you started your benefits at age 68, you would receive a credit of 8% per year multiplied by approximately two . This makes your benefit ~15% higher than the amount you would have received at age 66.

That higher baseline lasts for the rest of your retirement and serves as the basis for future increases linked to inflation. While it’s important to consider your personal circumstancesit’s not always possible to wait, particularly if you are in poor health or can’t afford to delaythe benefits of waiting can be significant.

If you decide to wait past age 65, you may still need to sign up for Medicare. In some circumstances your Medicare coverage may be delayed and cost more if you do not sign up at age 65.

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Can You Work While On Ssdi

Generally, SSDI recipients can’t do what’s considered “substantial gainful activity” and continue to receive disability benefits. In a nutshell, doing SGA means you’re working and making more than $1,350 per month in 2022 . So that’s how much you can make in 2022 without affecting your disability benefits. And, you can deduct disability-related work expenses from that total. For more information, see our article on SSDI income limits.

But, to encourage SSDI recipients to go back to work, Social Security has created some exceptions to this rule. SSDI recipients are entitled to a “trial work period” during which they can make more than the SGA amount without losing benefits.

Trial work period. For a nine-month trial work period, SSDI recipients are entitled to test their ability to work and continue to receive full benefits regardless of whether they make more than the SGA amount. For 2022, the Social Security Administration considers any month where a person has a monthly income of more than $970 to be a trial work month. If you’re self-employed, any month where you work more than 80 hours can also be considered a trial work month.

For more information, see our article on the trial work period, the extended period of eligibility, and expedited reinstatement.

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