How Much Can You Make While Receiving Social Security?
Social Security retirement benefits can be a confusing topic to say the least, but we want to break down how much you can make while receiving it.
- How much can you make while receiving Social Security?
- How do Social Security benefits work if you’re still working?
- What if you start withdrawals before full retirement age?
We’ll answer all those questions right here.
What Is Full Retirement Age?
All of the Social Security rules are based around what they call the full retirement age.
For many years, that has been age 65. However, that has now changed! Beginning with people born in 1938 or later, that age gradually increases until it reaches 67 for people born after 1959.
There is a simple retirement age calculator on the SSA website where you can input your birth year, and it’ll tell you your full retirement age.
For example, if you were born in 1942, your full retirement age is 65 and 10 months. If you were born in 1959, your full retirement age is 66 and 10 months. Full retirement age is 66 for people born between 1943 and 1954.
Regardless of your full retirement age, the earliest you can start receiving Social Security retirement benefits will remain age 62, and the latest you can start receiving benefits is 70.
What Will My Social Security Benefit Be?
Your Social Security Benefits are going to be very reliant on when you decide to start withdrawals.
If You Retire Early
You’re allowed to retire as early as age 62, but if you do, your benefits are reduced a fraction of a percent for each month before your full retirement age.
For example, let’s say you were born in 1950. Your full retirement age is 66, but you decide to retire 4 years early (or 48 months early). Your retirement benefit would be reduced by a whopping 25%! For example, a $1,000 retirement benefit would be reduced to $750. That decrease is permanent.
In addition, your spouse’s benefit would be reduced by 30%, or to $350 in this example.
Retiring early and taking Social Security benefits as early as age 62 really cuts down on the benefits you receive. However, you do receive benefits for a longer period of time.
If You Wait Until Full Retirement Age
If you wait until your full retirement age, your monthly retirement benefit will be higher.
Here’s an example of how your Social Security retirement benefit increases if you delay a few years:
As you can see in this example – assuming a $1,000 benefit at full retirement age – your benefits would increase to $1,280 per month at age 70. That’s a result of delayed retirement credits that you’ve earned for waiting to receive benefits. The benefit example at age 70 is about 76% more than if you would have started at age 62!
In order to estimate your own retirement benefits, utilize the Retirement Benefits Calculator provided by the SSA. You will have to verify your identity at first, but then you’ll be able to see what your benefits might be.
What If I’m Still Working?
You’re allowed to keep working while you receive Social Security (SS) retirement benefits. In fact, more and more individuals over the age of 65 continue to work, so it’s not uncommon! Many also do this out of necessity – the SS benefits alone aren’t really enough to live on comfortably.
The nice part about working and receiving SS benefits is that it can mean a higher benefit for you in the future. Essentially, you’re increasing your lifetime earnings, which slightly increases your benefits for future years.
If you’re working and are under the full retirement age (see above), you’re going to earn a reduced amount from Social Security. This benefit reduction only applies when you’re working under the full retirement age. It has no effect on the amount you’ll earn in the future.
When you reach full retirement age, Social Security will recalculate your benefit to give you credit for the months you didn’t get a benefit because of your earnings. In addition, as long as you continue to work and receive benefits, they’ll check your record every year to see whether the extra earnings will increase your monthly benefit.
What If I’m Working and Claiming Early Benefits?
If you’re under your full retirement age for the entire year, Social Security will deduct $1 from your benefit payments for every $2 you earn above the annual limit. For 2019, that limit is $17,640.
For example, if you earn $5,000 more than the limit, your benefits will be reduced by $2,500.
If you earn too much, your benefit is going to be reduced so much that you won’t be able to receive any benefits at all.
In the year you will reach full retirement age – specifically the months leading up to it – the deduction decreases to $1 in benefits for every $3 you earn, but the earnings limit is different. In 2019, that limit is $46,920 – but Social Security only counts earnings before the month you reach your full retirement age.
For example, if you reach full retirement age in November, this new deduction and annual earnings limit applies to January through October of that year.
Once you officially reach full retirement age, your earnings no longer reduce your benefits, no matter how much you earn.
I know that’s a bit complicated, but the takeaway here is that if you start taking Social Security benefits before your full retirement age, and you’re still working, your benefits are going to be reduced for the time being.
You can play around with a Retirement Earnings Test Calculator to see what your benefit reduction may be!
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