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How Working Past Full Retirement Age Affects Your Social Security Benefit


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Ah, retirement . . . when we can stop keeping a dictated schedule and are able to arrange our days as we please. Even better, once we hit a certain age, the government pays us back each month for all the years we paid into the social security system.

We always hear that it's smart to continue working, at least part-time, as long as possible. What you may not know is how your social security benefits may be affected if you work while you collect social security. To ensure you collect the maximum benefit you're entitled to, here is some guidance:

Figure out your full retirement age

First, you need to find out what the government considers "full retirement age" for you. While you're probably eligible to start collecting benefits at age 62, the government considers 62 earlier than normal retirement age. Since benefit amounts depend on your age when you apply to collect payments, you'd receive a lower monthly benefit if you choose to collect at 62 than you would if you waited until full retirement age or later. Check this chart to find your full retirement age. This number is especially important if you intend to work and collect an income while also collecting social security benefits.

You might also be interested in: Is Your Retirement Savings on Track?

Reduced social security benefits

If you work and earn income while collecting social security, the government may reduce your benefits according to rules based on your age:

  • Once you reach full retirement age, your benefits are never reduced, regardless of how much income you earn.

  • Before your full retirement age:

    • During the year you'll reach full retirement age, the government subtracts $1 in payments for every $3 you earn above a yearly limit, currently $44,880. This reduction stops in the month you turn full retirement age.

    • During years you're younger than full retirement age, the government subtracts $1 in payments for every $2 you earn above a much lower yearly limit, currently $16,920.

  • Commission payments and bonuses are considered earnings; pensions, interest, investment income, annuities, and government (e.g., military) payments are not included in your earnings total.

Calculate your benefits

For planning purposes, of course, you want to know what to expect for your social security benefit amount. At full retirement age, your benefit amount will be the monthly average of your earnings for your 35 highest paid years. To calculate your amount, use the Social Security Administration's detailed calculator.

You've worked hard to build a comfortable retirement, and you deserve to enjoy every penny of your social security benefit. With a little planning, you can ensure you don't lose out on your full benefit, even if you continue working while collecting social security.

For more detailed advice and guidance specific to your portfolio, contact a wealth advisor.

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