What To Do If Your Benefits Are Already Being Withheld
If youre subject to the Social Security earnings limit, dont wait for the SSA to start reducing the benefit you receive. Instead, Id recommend voluntarily suspending benefits.
If you wait for the Social Security Administration to discover that youve earned too much working while receiving benefits, your risk of an overpayment notice is higher.
Either way, you arent missing payments that youll never get back. Your benefit amount will be recalculated at your full retirement age to reflect the months that benefits were withheld.
The best way to avoid the earnings limitation is to wait until full retirement age to file for benefits. If you cant wait, make sure you have a clear understanding of how working impacts your Social Security benefits.
If you still have questions, you could leave a comment below, but what may be an even greater help is to join my . Its very active and has some really smart people who love to answer any questions you may have about Social Security. From time to time Ill even drop in to add my thoughts, too.
You should also consider joining the 295,000+ subscribers on my YouTube channel! For visual learners , this is where I break down the complex rules and help you figure out how to use them to your advantage.
They Had Company Pensions
Company pensions were a retirement savings option for a lucky few before the advent of the Social Security system. The Alfred Dolge Company was the first to institute a pension in 1882. Today, most companies have abandoned pensions in favor of participant-directed savings, such as 401 plans. As early as 1932, however, only 15% of the American workforce had access to a company pension.
Theres A Social Security Spousal Benefit
Marriage brings couples an advantage when it comes to Social Security. One spouse can take what’s called a spousal benefit, worth up to 50% of the other spouse’s Social Security benefit. For example, if your monthly Social Security benefit is worth $2,000 but your spouse’s own benefit is only worth $500, your spouse can collect a spousal benefit worth $1,000 — bringing in $500 more in income per month.
Just as the benefit based on your own work history is reduced if you claim it early, the same is true for a spousal benefit. That 50% figure is the maximum amount that only a spouse who is at least full retirement age is eligible for. Taking the spousal benefit early at, say, age 62, reduces the amount to as little as 32.5% of the higher earners benefit. If you take your own benefit early and then later switch to a spousal benefit, your spousal benefit will still be reduced.
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They Had State Pensions
Those who worked in the public sector before the age of Social Security might have benefited from a state pension. Although approximately half of elderly Americans werent self-sufficient as of 1934, state welfare pensions were basically nonexistent before 1930. And although 30 states put state pensions in place by 1935, only about 3% of elderly Americans were actually receiving state benefits by that year.
A lack of pensions is one of the many reasons why its harder to save for retirement today than 50 years ago.
Social Security Didn’t Always Exist Here’s How Seniors Managed Without It
Social Security serves as a critical source of income for millions of retired seniors today. But the program didn’t exist before 1935, which means that back in the day, Americans had to get more proactive about securing an income stream for their old age. Here are just some of the financial resources they tapped instead, courtesy of GOBankingRates.
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What Is The Social Security Income Limit
The earnings limit is also known as the income limit, or the earnings test. The official term is earnings test, but income limit and earnings limit are the terms that youll hear most often.
For our purposes, know that all these terms mean the same thing and there are four quick facts about the Social Security income limit that you should know before we jump all the way into explaining the test or limit:
Tax Considerations For Social Security Benefits
How do these tax considerations affect when you should apply for Social Security benefits? At todays , they may not have much of an impact on most people. Still, tax rates and income thresholds can change, so its worth remembering that you will lose less of your Social Security to taxes if you are in a lower marginal tax bracket when you begin to collect.
You should also note that if you decide to return to work, even part-time, and arent yet at your FRA, your Social Security benefits may be temporarily reduced. The reduction is $1 for every $2 of earned income over $18,960 in 2021 . During the year when you reach your FRA, your benefits will be reduced by $1 for every $3 in income over $50,520 in 2021 until the month when you become fully eligible. That money isnt lost, however. The SSA will credit it to your record when you reach your FRA, resulting in a higher benefit.
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What To Know About Working While Receiving Retirement Benefits
Andy Smith is a Certified Financial Planner , licensed realtor and educator with over 35 years of diverse financial management experience. He is an expert on personal finance, corporate finance and real estate and has assisted thousands of clients in meeting their financial goals over his career.
The Balance / Marina Li
If you take Social Security benefits before you reach your full retirement age, and you earn an annual income in excess of the annual earnings limit for that year, your monthly Social Security benefit will be reduced for the remainder of the year in which you exceed the limit. If you will reach full retirement age during that same year, it will be reduced every month until you reach full retirement age.
The income withheld will be paid out once you reach full retirement age. In other words, your benefits aren’t lost they’re delayed.
Investment income does not count toward the annual earnings limit the only income that counts is earned incomethe income you earn by working either for someone or as a self-employed person.
Know Your Social Security Full Retirement Age
First things first:Determine your Social Security full retirement age. For people born between 1943 and 1954, full retirement age is 66. If your birthday falls between 1955 and 1959, it gradually climbs to 67. If you are born in 1960 or later, your full retirement age is 67.
You can claim your Social Security benefits a few years before or after your full retirement age, and your monthly benefit amount will vary as a result. More on that in a moment.
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Just How Rare Are Nawi Declines
In the last 70 years of Social Security payments, a wage index decline has only happened once . But that decline was so inconsequential , that Congress didnt see any reason to act.
If the current decline in the NAWI remains the same for the remainder of 2020, Congress will have until about the end of 2021 to fix this predicament.
When Can I Start Collecting Social Security Retirement Benefits
The Social Security Administration used to consider 65 to be full retirement age for the retirement benefit. Benefits amounts were calculated on the assumption that most workers will stop working full time and will claim retirement benefits when they reach age 65.
Now that people are generally living longer, Social Security’s rules about what is considered full retirement age have changed. Age 65 is still considered full retirement age for anyone born before 1938. But full retirement age gradually increases from age 65 to 67 for people born in 1938 or later. For anyone born after 1960, the full retirement age is 67.
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You Can Undo A Social Security Benefits Claiming Decision
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.
Can I Keep A Job Even After I Start Collecting Retirement Dependents Or Survivors Benefits
Yes, and many people do just that. People who are past full retirement age may work and earn any amount without losing any of their Social Security benefits.
But before you reach full retirement age, Social Security will subtract money from your benefit check if you exceed a certain amount of earned income for the year . The limit applies only to earnings from work it does not apply to income from such things as savings, investments, pensions, or rental property. In other words, earnings from these sources will not affect your Social Security benefits.
The Social Security Administration has added a special twist for the year in which you reach full retirement age. During the 12 months prior to your birthday, you will lose one dollar of benefits for every three dollars you earn over a set monthly limit . After your birthday, you can earn any amount of money without losing benefits.
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They Turned To Church Congregations
Churches have long been a source of comfort and support for people from all walks of life. As the Great Depression swept across America, many with nowhere else to turn leaned on their local church, whether they were parishioners or not. Churches were often a place people could get some warmth and food.
How Much Can I Earn
The annual Social Security earnings limit for those starting benefits before reaching full retirement age in 2021 is $18,960. In 2022, the limit is $19,560. Full retirement age is based on your year of birth.
If you earn over the limit, there are rules that determine how much your Social Security benefits will be reduced. There are three different earnings limit rules that apply, depending on whether you earn the income before, during, or after the year your reach full retirement age.
Each option is covered below.
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.
Some American College Students
American college and university students who work part-time at their schools may also qualify for an exemption from Social Security tax. The job must be contingent on the students full-time enrollment at the college or university or half-time status if in the last semester or trimester.
“Students who are employed by a school, college, or university where the student is pursuing a course of study are exempt from paying FICA taxes as long as their relationship with the school, college, or university is student, meaning education is predominantly the relationship, not employment,” says Alina Parizianu, CFP®, MBA, who as of 2021 was a financial planning specialist for MMBPB Financial Services in New York.
Income beyond a certain level isn’t subject to Social Security tax, but Medicare tax applies to all income.
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Can I Collect More Than One Type Of Benefit At A Time
No. You may qualify for more than one type of Social Security benefit at a time, but you can collect just one. For example, you might be eligible for both retirement and disability, or you might be entitled to benefits based on your own retirement as well as on that of your retired spouse. You can collect whichever one of these benefits is higher, but not both.
Timing And Your Health Coverage
Your health insurance coverage can also play a role in deciding when to claim Social Security benefits. Do you have a health savings account to which you would like to keep contributing? If so, note that if youre age 65 or older, then receiving Social Security benefits requires you to sign up for Medicare Part A, and once you sign up for Medicare Part A, youll no longer be allowed to add funds to your HSA.
The SSA also cautions that even if you delay receiving Social Security benefits until after age 65, you might still need to apply for Medicare benefits within three months of turning 65 to avoid paying higher premiums for life for Medicare Part B and Part D.
In 2022, the average monthly premium for Part D will be $33 per month versus $31.47 in 2021. If you enroll in a Medicare Advantage plan, the average monthly premium will be $19 per month in 2022 versus $21.22 in 2021. However, if you are still receiving health insurance from your or your spouses employer, you might not yet have to enroll in Medicare.
As of Oct. 16, 2021, Social Security offices are only open by appointment, and to get an appointment you need to be in a limited, critical situation. Most people will have to transact their business online, by phone, or through the mail.
Earliest Normal Social Security Eligibility Age: 62
Even though you can begin receiving benefits as early as 62, that doesn’t mean you should start taking them at that age. This is primarily because you will receive reduced benefits. If you want a larger amount of guaranteed income later in retirement, then waiting to begin benefits until you are a few years older will make sense. Remember, even if you are retired, you can wait until you’re 70 to apply for Social Security so that you get a higher benefit. It is one of the best ways to make sure you have a higher amount of inflation-adjusted income later in life.
Also, if you take Social Security at this early age and you have earnings above the Social Security earnings limit, your Social Security benefits will be reduced. Once you reach full retirement age , there is no reduction in benefits for continuing to work, no matter how much you make.
You can apply for Social Security retirement benefits any time after you reach 62. Once you reach 62, think of it like open enrollment you can begin at any time and do not have to wait until another age cut off.
Social Security Disability Programs
In addition to retirement benefits, the Social Security Administration manages two programs that provide benefits to people who are disabled or blind.
- Social Security Disability Insurance Program
- SSDI supports disabled or blind individuals by providing benefits based on their workers contributions to the Social Security trust fund. Your contributions are based on your earnings or your spouses or parents earnings while in the workforce. Your dependents may also be eligible for SSDI benefits based on your earnings.
- Supplemental Security Income Program
- SSI benefits are paid out as cash assistance to people with limited incomes and resources who are elderly, blind or disabled. These benefits may also include blind or disabled children. SSI payments are a federal benefit funded by the general fund of the United States not the Social Security trust fund. Some states provide additional state supplemental benefits in addition to the federal SSI payments.
In some cases, people may be eligible for both SSI and SSDI at the same time. The Social Security Administration calls these concurrent benefits. This can happen when a disability qualifies you for Social Security Disability Benefits, but you only get a small amount of monthly SSDI benefits. This may qualify you to receive SSI benefits as well.
Comparing SSDI and SSI Programs
|Up to 85%|
Income Taxes for Other Benefit Programs
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