It’s crucial to decide when to begin receiving Social Security retirement benefits. Since no two people have the same goals, finances, or lifestyle, there isn’t a single option that suits everyone.
Would it be better to begin receiving retirement benefits right away or to hold off until you could receive a larger benefit amount?
You must consider these crucial inquiries as you make retirement plans. To assist you in choosing wisely, think about the following four options.
A Comprehensive Guide to Understanding the Impact of Work on Your Social Security Benefits
Navigating the complexities of retirement planning can be challenging, especially when considering the interplay between work and Social Security benefits. This article delves into the specifics of collecting Social Security at age 62 while continuing to work, providing valuable insights into the potential impact on your benefits and overall financial situation.
Understanding the Rules for Working While Receiving Social Security
While it is perfectly permissible to work and receive Social Security retirement benefits simultaneously, it is crucial to understand the associated rules and potential implications. If you are younger than your full retirement age (FRA), which is currently 67 for individuals born in 1960 or later, your benefits may be reduced if your earnings exceed certain limits.
Earnings Limits and Benefit Reductions
The Social Security Administration (SSA) has established annual earnings limits for individuals receiving benefits before reaching their FRA. In 2023, the limit is $21,240. For every $2 you earn above this limit, $1 will be withheld from your Social Security benefits.
Example of Benefit Reduction
Let’s consider an example to illustrate how the earnings limit works. Suppose you are 62 years old and your monthly Social Security benefit is $1,000. If you earn $25,000 in 2023, which is $3,760 above the earnings limit, your annual benefits will be reduced by $1,880 ($3,760 x $1/2). This means you will receive $8,120 in Social Security benefits for the year ($12,000 – $1,880).
Full Retirement Age and Benefit Increases
Once you reach your FRA, the earnings limit no longer applies, and you can receive your full Social Security benefits regardless of your earnings. Additionally, any benefits withheld due to earlier earnings will be factored into your monthly benefit amount, resulting in an increase.
Impact of Work on Future Benefits
Even if your benefits are reduced due to work before your FRA, there is a silver lining. The SSA will re-evaluate your earnings record each year and may increase your future benefits based on your higher earnings. This means that working while receiving Social Security can ultimately lead to a higher monthly benefit in the long run.
Additional Considerations
Beyond the earnings limits and benefit adjustments, there are a few other factors to consider when working while receiving Social Security:
- Taxes: Your Social Security benefits may be subject to federal income taxes if your combined income (including wages and benefits) exceeds certain thresholds.
- Medicare: If you are enrolled in Medicare, working may affect your Part B premiums.
- Spousal and Survivor Benefits: If you are receiving benefits based on your spouse’s work record, your earnings may impact their benefits as well.
Working while receiving Social Security at age 62 can have both positive and negative implications for your benefits. Understanding the earnings limits, benefit adjustments, and potential tax consequences is crucial for making informed decisions about your retirement planning. By carefully considering these factors and consulting with financial advisors, you can maximize your Social Security benefits and achieve your financial goals.
B. You can stop working and start receiving your retirement benefits
Your benefits are decreased by a small percentage for each month that you decide to quit working and begin receiving retirement benefits before you reach your full retirement age. Also, your benefits will not increase because of additional earnings.
Your benefit calculation will be impacted if you quit your job before reaching 35 years of earnings or if you have years of low earnings. Your benefits are determined by taking the highest 35 years of earnings into account.
You will be qualified for delayed retirement credits, which would raise your benefit, if you wait to start receiving benefits until after reaching full retirement age.
When you turn 65, Original Medicare (Parts A and B) is automatically enrolled if you quit your job and begin receiving retirement benefits before that age. You must apply for Medicare benefits three months prior to turning 65 if you are not receiving your Social Security benefits at that time. For the duration of your Medicare coverage, you may be required to pay a late enrollment penalty if you fail to enroll in Medicare Part B when you are first eligible.
A. You can continue working and start receiving your retirement benefits
Your benefits are lowered by a small percentage for each month that you begin receiving benefits before reaching full retirement age.
Before reaching your full retirement age, you can work and receive Social Security retirement benefits simultaneously. However, if your income exceeds the annual earnings caps, your benefits will be cut.
We will recalculate your benefit amount once you reach full retirement age to credit any months in which your earnings prevented you from receiving a benefit. Any increases in the amount of your benefits will be explained in a letter that we send you.
You will be eligible for delayed retirement credits, which would raise your monthly benefit, if you wait to file for benefits until after reaching full retirement age. In the event that you continue working, you will be eligible to receive your full retirement benefits as well as any increases brought about by your higher income when your benefits are recalculated. Your earnings have no bearing on the amount of your benefits once you reach full retirement age.
When you turn 65, Original Medicare (Parts A and B) is automatically enrolled if you begin receiving retirement benefits before that age. Before enrolling in Medicare Part B, if you or your spouse are still employed and enrolled in a group health plan offered by your employer, speak with the personnel office. To learn more, read our Medicare publication.
Working while Receiving Social Security
FAQ
How much money can you make at 62 and still draw Social Security?
Can you take Social Security at 62 and still work full time?
What is the average Social Security benefit at age 62?
Why retiring at 62 is a good idea?
What happens to social security if you work at 62?
Your Social Security benefits could be reduced if you continue to work after beginning to collect benefits at 62. However, you’ll be repaid all of those withheld benefits once you reach your full retirement age — with COLAs applied. It’s even possible that your base benefits could increase as a result of working.
Do you get Social Security if you retire at 62?
Using the SSA’s example in its “How Work Affects Your Benefits” publication, if your monthly Social Security payment at 62 years is $600 ($7,200/year) and you intend to make $23,920 for the year, you will get payments withheld for the $4,360 you earn over the $19,560 limit. However, you will get the money back once you reach full retirement age.
Can I take Social Security benefits if I’m still working?
You can take Social Security benefits while you’re still working. If you’re under your full retirement age, however, your benefits will be temporarily reduced. Once you reach full retirement age, there’s no limit on how much you can earn while collecting full benefits. You can start receiving your Social Security benefits at the age of 62.
Can a 66 year old work on social security?
Yes. You can still collect Social Security at age 66 and work full-time. If you are not at full retirement at age 66, however, your benefits will be reduced. However, if your full retirement age begins at age 66, you can earn your full benefits and continue to work. How Many Hours Can You Work on Social Security?