Can you work while you receive Social Security benefits? If you are under full retirement age and receiving more than the yearly earnings limit, the work that you are doing could reduce or eliminate your Social Security benefit amount.
What Is Full Retirement Age?
Full retirement age is currently 66 for those born between 1943-1954. If you were born after 1955, there are two months added for each birth year until 1960. If you were born in 1960 or after, full retirement age is 67. If you are under full retirement age for the entire duration of the year, $1 will be taken from your Social Security benefits for every $2 above the annual earnings limit that you earn. In 2019, the earnings limit is $17,640. If you are full retirement age, $1 will be deducted for every $3 that you earn over the adjusted earnings limit, which is $46,920, counted towards the month before you reach retirement age.
What Does This Mean for You?
Starting with the month that you reach full retirement age, your earnings will not be reduced regardless of your income. This means that the Social Security Administration will instead recalculate your benefit amount to leave out any months where it reduced or withheld benefits due to earnings. This recalculation occurs every year when the SSA reviews your records. If your earnings for the prior year are higher than a year used to calculate your benefits, your Social Security will be adjusted upward. That increase will be applied retroactively to January starting the year after you earned the money.
What Counts As Income?
When SSA determines how much it will deduct from your Social Security benefits, it will only count wages that you receive from a job or the net-profit of your self-employed business. Folded into that number is also vacation pay, commissions and bonuses. What won’t be counted as income?
- Investment income
- Veterans benefits
- Government or military retirement benefits
For as long as you are working and still receiving benefits, SSA will examine your records and see if your earnings will increase your monthly benefit amount. Whenever they have determined you should receive an increase, you will receive a letter in the mail notifying you.
Tax Planning and Retirement Planning with Miles Tax Advisory
If you are uncertain how your income will affect your Social Security benefits or looking to get started on your 2020 tax planning, we are always here to assist you!