Monday, May 16, 2022

Can You Work And Collect Social Security

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When Should You Start Social Security Benefits

Can you work while collecting social security? (deeper look)

The general rule of thumb is that you should delay the start of Social Security benefits as long as possible, regardless of whether you intend to work or not.

This is because the earlier you start, the smaller your monthly benefit check will be.

Use the NewRetirement Planner the best most comprehensive online planning platform to help you determine the best time for you to start benefits.

This powerful tool can tell you exactly how your cash flow, net worth, out-of-savings age and debt situation will be impacted by different Social Security benefit amounts and start ages, factoring in penalties for any work income received before full retirement age.

Working Can Mean Lower Benefits Until You Reach Full Retirement Age

      You can collect Social Security benefits if you are still working and earning income. But if you earn more than a certain amount from your workand haven’t reached your full retirement ageyour benefit will be smaller. Here’s a rundown of how earned income can reduce your Social Security benefits.

      How Are My Social Security Benefits Calculated

      Social Security benefits are based on your 35 highest-paid working years, with some adjustments made for inflation. Earning $100,000 in 1970 is very different than making $100,000 in 2021. I wont bore you with the specific details of the inflation adjustments here. Those who work less than 35 years will see lower benefits. So, working past 70 could help fill in the year with zero income or lower than average incomes. Shorter working histories are common for people with several years of schooling or parents who left the workforce to raise children. It could also apply to people who took time off work to care for an aging parent.

      To get your final benefit, the Social Security Administration calculates your Average Indexed Monthly Earnings or AIME. Your AIME is computed by dividing the sum of all your indexed wages by 420. Eventually, your actual Social Security benefit amount is calculated based on a variety of factors, such as the age at which you start collecting benefits. Remember, benefits will be lowered if you start taking them before full retirement age.

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      How We Deduct Earnings From Benefits

      In 2021, if youre under full retirement age, the annual earnings limit is $18,960. If you will reach full retirement age in 2021, the limit on your earnings for the months before full retirement age is $50,520.

      Starting with the month you reach full retirement age, there is no limit on how much you can earn and still receive your benefits.

      Let’s look at a few examples. You are receiving Social Security retirement benefits every month in 2021 and you:

      • Are under full retirement age all year. You are entitled to $800 a month in benefits.

        You work and earn $28,960 during the year. Your Social Security benefits would be reduced by $5,000 . You would receive $4,600 of your $9,600 in benefits for the year.

      • Reach full retirement age in August 2021. You are entitled to $800 per month in benefits.

        You work and earn $63,000 during the year, with $52,638 of it in the 7 months from January through July.

        • Your Social Security benefits would be reduced through July by $706 . You would still receive $4,894 out of your $5,600 benefits for the first 7 months.
        • Beginning in August 2021, when you reach full retirement age, you would receive your full benefit , no matter how much you earn.

      If you are eligible for retirement benefits this year and are still working, you can use our earnings test calculator to see how your earnings could affect your benefit payments.

      How Social Security Calculates Your Benefit

      Can You Collect Social Security Disability And Still Work ...

      The amount you receive in Social Security benefits is based on an average of your 35 highest-earning years. So if you’re earning more now than ever before, your best bet is to keep working, if that’s possible, and delay receiving benefits until age 70. You’ll then be eligible for your maximum benefit.

      On the other hand, if you keep working but start taking benefits early, you may run up against the Social Security income limits. For 2021, Social Security will deduct $1 of every $2 you earn over $18,960 if you are under your full retirement age. During the year you reach full retirement age, it will deduct $1 for every $3 you earn over $50,520 until the month you reach full retirement age. After that, you’ll receive your entire benefit.

      Note that any money Social Security withholds from your benefit isn’t lost forever. After you reach full retirement age, Social Security will recalculate your benefit and increase it to account for the benefits that were withheld earlier.

      The reduction in Social Security benefits for people who earn over a certain amount is based only on earned income. Unearned income, such as from pensions or investments, doesn’t count.

      Recommended Reading: When Should You Apply For Social Security

      Should You Work And Collect Social Security

      Now that you know that you can work and still collect Social Security, the question becomes, should you?

      As with most things, it depends.

      Remember that the annual earned income limits only affect your Social Security benefits under full retirement age. If you are over the full retirement age, you may work as much as you please without that income affecting your benefits.

      If you are under full retirement age and receiving Social Security retirement benefits, consider the annual income limits and whether or not you anticipate making more than the limit.

      If you are slightly over the limit, the impact on your benefits will be minimal. Still, if you are significantly over the limit, the extra income youll bring in likely wont outweigh the reduction in benefits.

      Suppose you want to keep working and earn significantly more than the annual earnings limits listed above. In that case, you should consider delaying taking your retirement benefits until youve reached full retirement age and the point where your earnings wont impact your benefits.

      You may still be unsure whether it makes sense for you to work and collect Social Security. If so, consider hiring a retirement advisor, a financial advisor specializing in helping people nearing retirement. You’ll find many retirement advisors have earned the Retirement Income Certified Professional designation, so they can help you determine the best time to claim Social Security based on your circumstances.

      Collecting Early And Still Working

      While you can collect social security and still work, if your earnings exceed the annual limit and you are below your full retirement age, you will see a drop in your monthly income. For 2020, retirees who are below full retirement age can make $18,240 per year before benefits are reduced. If your income goes beyond that limit, Social Security will reduce your benefit $1 for every $2 you make above the limit.

      In the year that you reach full retirement age, those restrictions loosen to $1 for every $3 that you earn above the limit. This reduction only applies in the months leading up to your full retirement age. Once you reach that age your benefit will no longer be reduced. Lets use an example to demonstrate.

      Andys full retirement age is 67 and he was born on May 15th. He started collecting benefits at age 65 when he left his job and began working part-time at the local wine shop. Between tips and commissions, Andy made about $20,000 in his first couple of years working in the wine store. Since his earnings were above the $18,240 limit, Andys social security benefit was reduced $1 for every $2 earned.

      But in the year that Andy reaches full retirement age, from January to May, that reduction will lessen to $1 for every $3 earned up until May 15. Once he reaches his full retirement age his benefit is no longer reduced.

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      Working And Ssdi Benefits

      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 are working and making more than $1,310 per month in 2021 . To encourage SSDI recipients to go back to work, however, 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.

      For the 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 2021, the Social Security Administration considers any month where a person has a monthly income of more than $940 to be a trial work month. If you are self-employed, any month where you work more than 80 hours can also be considered a trial work month.

      Once you have completed the nine-month trial work period , you can still receive SSDI for any month where your earnings fall below the SGA level, for a period of 36 months. This three-year period is called the “extended period of eligibility.” In other words, if you earn less than $1,310 in any month, you will get benefits, but if you earn more than $1,310 in any month, you won’t get disability benefits for that month .

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

      Certain Immigrants Over Age 65

      Can you work while collecting social security? (maybe)

      Retired people who immigrate to the United States will not have the 40 U.S. work credits that they need to qualify for Social Security benefits. One way to rectify this problem is to earn six work credits in the United States and receive prorated U.S. benefits combined with prorated benefits from their former country under a totalization agreement. This solution makes sense for workers who also do not have enough benefits in their home country to qualify for that countrys equivalent of Social Security payments.

      Older immigrants who do not qualify for U.S. Social Security and whose countries laws allow them to receive benefit payments while residing abroad can claim their Social Security or pensioners benefits while living in the U.S.

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      How Much Can You Earn Without Losing Social Security Retirement Benefits

      The impact of work on your Social Security retirement benefits will vary depending on whether you have reached full retirement age .

      FRA is the age at which you’re entitled to claim full retirement benefits without a reduction due to filing early. Your FRA depends on your birth year, as the chart below shows. If you’ve already reached it, you can work as much as you want without affecting your benefits. If you’re below it, you can do some work, but some of your benefits checks could be withheld if you earn too much.

      The amount of income you can earn before your benefits are withheld will vary depending on whether you will reach FRA at some point in the year you’re working.

      The Trial Work Period Incentive

      You can continue to receive your Social Security disability benefits while working during whats referred to as a Trial Work Period . For 2014, if you earn more than $770 in any given month while receiving SSD, you will be automatically begin a TWP.

      Under the TWP incentive, you can receive your full benefits for nine months in any five-year period while earning $770+ per month. If your income falls below $770 in any given month, it does not count toward your nine-month TWP.

      Read Also: How To Get Social Security Number Of Deceased Parent

      What Is A Social Security Card

      Your Social Security card is an important piece of identification. You’ll need one to get a job, collect Social Security, or receive other government benefits.

      When you apply for a Social Security number , the Social Security Administration will assign you a nine-digit number. This is the same number that is printed on the Social Security card that SSA will issue you. If you change your name, you will need to get a corrected card.

      What If I Take Benefits Early

      Can You Work And Still Collect Social Security Benefits ...

      If you choose to receive your Social Security check up to 36 months before your full retirement age, be aware that your benefit is permanently reduced by five-ninths of 1% for each month.

      If you start more than 36 months before your full retirement age, the benefit is further reduced by five-twelfths of 1% per month, for the rest of retirement.

      For example, lets assume that you stop working at age 62. If your full retirement age is 66 and you elect to start benefits at age 62, the reduced benefit calculation is based on 48 months. This means that the reduction for the first 36 months is 20% and 5% for the remaining 12 months. Overall, your benefits would be permanently reduced by 25%.

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      Workers Who Retire In Certain Foreign Countries

      U.S. citizens who travel toor live inmost foreign countries after they retire usually can receive Social Security benefits. However, if that country is Azerbaijan, Belarus, Cuba, Kazakhstan, Kyrgyzstan, Moldova, North Korea, Tajikistan, Turkmenistan, or Uzbekistan, then the government will not send them Social Security payments. Exceptions may be available in all of these countries except Cuba and North Korea. Use the governments Payments Abroad Screening Tool to see if you will be able to continue receiving Social Security benefits while living abroad.

      Earn Ssa Work Credits In Some Countries

      You may not have enough credits from your work in the United States to qualify for retirement benefits. But, you may be able to count your work credits from another country. The SSA has agreements with 24 countries. If you earned credits in one of those countries, they can help you qualify for U.S. benefits.

      Also Check: I Receive Social Security Income

      Special Rules For The Year You Hit Full Retirement Age

      In the year you reach full retirement age, youre likely to go over the SSA earnings limit, as you might still be working your full-time job for half the year or more. In recognition of this, the SSA makes some adjustments to the earnings withholding policy. Rather than reducing benefits by $1 for every $2 you earn, in the year you hit full retirement age, your benefits are only reduced by $1 for every $3 you earn. Additionally, the earnings limit gets a substantial boost, from $18,960 to $50,520.

      So, if you earn $59,520 before hitting full retirement age, your payout will be reduced by $3,000, as youre $9,000 over the earnings limit. However, the month you hit full retirement age, your benefits will be adjusted upwards to reflect the prior withholding.

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      What Happens To The Money Social Security Withholds

      Can I collect Social Security Retirement and Social Security Disability?

      The Social Security Administration calculates the appropriate amount that you’ll forfeit and then takes it out of your monthly benefits. You’ll see entire monthly checks held back by the government to cover the withholding. For example, if you normally get Social Security of $1,000 per month but you have to forfeit $4,000, then Social Security will hold back four months’ worth of checks.

      As painful as it is to lose your benefits, there is some payback. If you lose a month’s worth of benefits, then Social Security treats you as if you retired a month later than you did. Once you hit full retirement age, you’ll start getting larger monthly checks based on that later retirement date. You might not get all your lost money back, but the bigger checks will gradually send some of it your way.

      Also Check: What Can I Expect From Social Security

      How Workers Comp May Affect Your Retirement Benefits

      Social security retirement benefits in the US are computed using the system. When you work, social security taxes are deducted from your pay. These taxes earn you corresponding social security credits.

      If you are born in 1929 or later, you need to earn 40 credits to claim retirement benefits. Being permanently disabled before reaching the required credits might affect your eligibility.

      Aside from credits, your average indexed monthly earnings during your entire career also determine how much youll get. If there are times when you stopped working or are earning much less, youll get reduced benefits.

      This is another part where your workers compensation might affect your retirement benefits. Thats because workers comp is granted on the assumption that your injury prevents you from going back to work or earning the same amount of income from before the accident.

      Even if you get back to work after a time, there will still be months where you didnt earn any income. This can affect your AIME and consequently reduce your benefits.

      What Happens If Some Of Your Benefits Are Withheld

      The SSA does not account for the reduction in benefits by making each month’s check smaller throughout the year. Instead, the SSA will not send any checks until the full amount has been withheld for the year. For the SSA to do this, you are expected to report your projected earnings ahead of time.

      If you receive monthly benefits of $1,200 per month and you’re supposed to have $5,800 withheld because of how much you’re working, it would take about 4.8 months of having your full $1,200 benefit withheld to account for the $5,800. The SSA would round up to five months. For the first five months of the year, you won’t receive benefit checks at all. Then you’d get your full $1,200 in benefits for the remaining seven months.

      In this example, the SSA withheld $200 too much from you . You’d receive the extra $200 back in your check the next year.

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