An estimated $1,907 will be the average monthly Social Security retirement benefit in 2024. Even though a consistent monthly income is beneficial, it is typically insufficient to meet living expenses. Thats one reason many people are working longer. Of course, some people just want to work until they retire because they enjoy it and want to pursue their careers or find other ways to remain in the workforce.
For whatever reason, as long as you continue to work and make money, you are eligible to receive Social Security benefits. However, your benefits will temporarily be reduced if you earn more than a specific amount and have not yet reached full retirement age. Dont worry, though: they wont be lost forever. The Social Security Administration (SSA) will recalculate your monthly benefits after you reach full retirement age, increasing them to reflect the benefits that it withheld earlier.
Partner and chief investment officer at MarksNelson Matt Ahrens says, “The most important thing to remember if you are working is to notify the Social Security Administration if youre going to earn wages in excess of the earnings threshold.”
If not, he says, “You won’t tell them how much you made until you file your taxes the next year.” Additionally, if you received more benefits than you needed, you might have to pay them back, face penalties, or see your benefits go down in the future. “.
Navigating the complexities of Social Security benefits and working after retirement can be overwhelming. This comprehensive guide will answer your questions about earning income while receiving Social Security retirement benefits, specifically focusing on the scenario of retiring at age 62.
Key Points:
- You can work and collect Social Security retirement benefits at the same time, but your benefits may be reduced if you earn above a certain amount.
- The earnings limit for 2023 is $21,240 per year. For every $2 you earn over this limit, your monthly benefit will be reduced by $1.
- There are special rules for the year you reach full retirement age (67 for people born in 1960 or later).
- You will get back the reduction in benefits you incurred due to working once you reach full retirement age.
- You can earn any amount without penalty after you reach full retirement age.
Understanding the Social Security Earnings Limit:
- The earnings limit applies only to the years you’re working before reaching full retirement age.
- Your earnings don’t permanently lower the amount of benefits you’ll receive in future years.
- You can even make back some of the reduction in future years.
Earnings Limit for 2023:
- The maximum income you can earn after retirement in 2023 is $21,240 ($1,770 per month) without having your benefits reduced.
- The amount that’s exempt goes up each year.
Special Rule for the Year You Reach Full Retirement Age:
- If you’ll reach full retirement age in 2023, you can earn up to $56,520 per year without losing any of your benefits.
- For every $3 you earn over that amount in any month before you turn 67, you’ll lose $1 in Social Security benefits.
- Beginning in the month you reach full retirement age, you become eligible to earn any amount without penalty.
How Do You Report Earnings During Early Retirement?
- The SSA bases its retirement benefit calculations on earnings reported on W-2 forms and on self-employment tax payments.
- The SSA may request earnings estimates from some recipients, especially recipients of retirement benefits who have substantial self-employment income or those whose reported earnings have varied widely from month to month.
Will I Get Back the Reduction in Benefits From Working?
- The amounts of early retirement benefits you lose as a setoff against your earnings due to work aren’t necessarily gone forever.
- When you reach full retirement age, Social Security will recalculate your benefits to make up for the reduction.
- The agency will actually adjust upward the amount of your benefits to take into account the amounts you lost because of the earned income rule.
Can You Collect Unemployment Benefits and Social Security?
- You can collect unemployment benefits (assuming you otherwise qualify for them) even though you are also collecting your Social Security retirement benefits.
Additional Resources:
- Social Security Administration (SSA): https://www.ssa.gov/
- Nolo: https://www.nolo.com/legal-encyclopedia/will-i-get-penalized-working-while-collecting-social-security-retirement.html
- Ask an Advisor: How Much Money Can I Earn Working After Taking Social Security at Age 62?: https://finance.yahoo.com/news/ask-advisor-much-money-earn-172524045.html
Retiring at 62 and continuing to work can be a viable option for many individuals. By understanding the Social Security earnings limit and the special rules that apply, you can make informed decisions about your retirement income and maximize your benefits.
Remember, it’s always advisable to consult with a financial advisor to discuss your specific situation and develop a personalized retirement plan.
Frequently Asked Questions:
1. Can I work and still collect Social Security retirement benefits?
Yes, you can work and still collect Social Security retirement benefits. However, your benefits may be reduced if you earn above a certain amount.
2. What is the earnings limit for 2023?
The earnings limit for 2023 is $21,240 per year. For every $2 you earn over this limit, your monthly benefit will be reduced by $1.
3. Are there special rules for the year I reach full retirement age?
Yes, there are special rules for the year you reach full retirement age (67 for people born in 1960 or later). If you’ll reach full retirement age in 2023, you can earn up to $56,520 per year without losing any of your benefits.
4. Will I get back the reduction in benefits from working?
Yes, you will get back the reduction in benefits you incurred due to working once you reach full retirement age.
5. Can I collect unemployment benefits and Social Security?
Yes, you can collect unemployment benefits (assuming you otherwise qualify for them) even though you are also collecting your Social Security retirement benefits.
6. Where can I find more information about Social Security and working after retirement?
You can find more information about Social Security and working after retirement on the Social Security Administration (SSA) website, Nolo, and Ask an Advisor: How Much Money Can I Earn Working After Taking Social Security at Age 62?
7. Should I consult with a financial advisor?
Yes, it’s always advisable to consult with a financial advisor to discuss your specific situation and develop a personalized retirement plan.
Can You Collect Social Security at 62 and Still Work?
At age 62, you can continue to work while receiving Social Security retirement benefits. However, until you reach full retirement age, your benefits will be temporarily reduced if your income exceeds a specific threshold.
What Is Full Retirement Age?
Your normal retirement age, also referred to as your full retirement age, is the age at which you can start receiving full benefits from the Social Security Administration. For those born between 1943 and 1954, it is 66 years old; for those born on January 2, 1960, and beyond, it gradually rises to 67 years old.
In the event that, for instance, your full retirement age is67, you can begin receiving benefits as early as age 2062, but your benefit will always be 0% less than if you wait until age 562.
Wait until you are 70 years old if you can manage not to get your Social Security benefits at full retirement age. That will give you the maximum benefit each month.
Waiting until after age 70 to begin receiving benefits has no benefits.