What happens if you work while receiving Social Security

Understand how money earned from a job in retirement could impact your Social Security benefits.

  • By Rachel Hartman,
  • U.S. News & World Report
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Picking up a part-time job in retirement is an easy way to improve your retirement lifestyle. But before starting a retirement job, you’ll want to run the numbers to see how your Social Security benefits might change.

When to collect Social Security

Here's what to consider when determining the right time to start collecting Social Security.

If you start a new job after you begin receiving Social Security benefits, the payments you’re eligible for could change. If you receive Social Security income while working:

  • Your Social Security benefits might be temporarily reduced.
  • The Social Security earnings limit depends on your age.
  • The amount you earn can impact the benefits you receive.
  • You might be eligible for a higher Social Security benefit later.

Read on to understand the consequences of working while receiving Social Security benefits.

Consider your Social Security full retirement age

Once you have turned your full retirement age, there is no limit on how much you can earn while collecting Social Security payments. Your full retirement age is based on the year you were born. The full retirement age for anyone born between 1943 and 1954 is 66 years old. Individuals born in 1960 or later have a full retirement age of 67. “If you have reached full retirement age, you can earn as much as you wish without it affecting your Social Security benefits,” says Stuart Chamberlin, president and founder of Chamberlin Financial in Boca Raton, Florida. “If you have not reached full retirement age and are collecting Social Security benefits, then you will be subject to income limits.”

How much can you earn while receiving Social Security?

If you opt to work while receiving Social Security before your full retirement age, you will only be able to receive a certain level of income before your Social Security benefit is temporarily reduced. The Social Security earnings limit is $1,470 per month or $17,640 per year in 2019 for someone age 65 or younger. If you earn more than this amount, you can expect to have $1 withheld from your Social Security benefit for every $2 earned above the limit.

For example, suppose you are 65 years old and will reach full retirement age in 2020. If you receive $2,500 in Social Security benefits every month and have a job that pays $2,000 a month, you are over the income limit of $1,470 by $530 each month. During a year, you will receive $24,000 from the job, which is $6,360 more than the annual earnings threshold of $17,640. As a result, $1 out of every $2 above the threshold will be withheld. In this case, $265 will be withheld every month from your Social Security checks. You can expect to receive $2,235 each month from Social Security. When you turn your full retirement age, your payments will be recalculated to give you credit for the withheld portion of your benefit.

The Social Security earnings limit changes the year you turn 66

There's a different Social Security earnings limit for those who will turn 66 in 2019, and the penalty for earning too much is smaller. “If you are reaching full retirement age in 2019, then your threshold is much higher,” says Wendy Terrill, owner of Assurance & Guarantee in Graham, North Carolina. The Social Security income threshold increases to $3,910 per month or $46,920 a year in the year you turn your full retirement age. If you earn more than that amount, $1 will be withheld from your benefit for every $3 in excess earnings.

For example, if you will reach your full retirement age in 2019 and you currently receive $2,500 a month from Social Security along with $4,000 every month from a job, part of your benefit will be temporarily withheld. Your income surpasses the Social Security earnings threshold by $90. You can expect to have your benefits reduced by $30 each month, since $1 out of every $3 earned above the limit will be withheld until you turn your full retirement age.

Social Security payments are only withheld temporarily

When money is withheld from your Social Security checks, your benefit will be recalculated when you turn your full retirement age to give you credit for the withheld payments and your continued earnings. If you work while receiving benefits and are not yet full retirement age, “The amount that was deducted from your Social Security will be added back into your checks,” says Jared Weitz, CEO and founder of United Capital Source Inc. in Great Neck, New York. “This is a great payout to consider if you are still healthy and able to work during the early retirement years.”

Working can make your Social Security benefit taxable

If you are receiving Social Security benefits, you’ll want to keep in mind that any income from working, withdrawals from traditional IRAs or 401(k)s, and dividends and interest on your investments can contribute to making part of your Social Security payments taxable.

If the sum of your adjusted gross income, nontaxable interest and half of your Social Security benefit is higher than a certain amount, a portion of your Social Security payments might be taxable. “If you file as single on your income taxes and have earned income of between $25,000 to $34,000, then as much as 50% of your Social Security benefits can now be taxable,” Terrill says. For income that is greater than $34,000 ($44,000 for couples), up to 85% of your Social Security benefit can be taxable.

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