Working And Collecting Social Security The Smart Way

by Neal Frankle, CFP ®

You may not realize how working and collecting social security intersect and that’s a shame for two reasons. First, while it’s not all that complicated, minor details can trip you up. Second, by understanding a few straight-forward rules, you might be able to boost your retirement income significantly. Why not try to qualify for a higher Social Security benefit if you can? OK…let’s get to work.

First it’s important to understand that anybody can work even if they are receiving Social Security benefits. And if you do so at full retirement age or greater, you can keep every penny of that SSI check. However, if you are younger than full retirement age, you might get some of your Social Security clawed back. And this can impact your spouse’s Social Security benefits also.

How Your Age Impacts Working And Collecting SSI

If you were born between 1/2/43 and 1/1/55 your full retirement age is 66 years of age. So if you were born during that period you can work as much as you want without worrying about any Social Security penalty as long as you are 66 or older. If you are younger than 66 and born in that time period and eligible for Social Security, you may lose some of your monthly SSI pension if you work.

What Is The Penalty For Working And Collecting SSI Prior to Full Retirement Age

If you won’t reach full retirement age this year, Social Security will deduct $1 from your benefits for every $2 you earn above $15,120. If you reach full retirement age any time during this year, the Social Security bureaucrats will dock you $1 for every $3 you earn above $40,080. But that only counts up to the month you reach full retirement age. So if you turn 66 in June, you are home free as long as you earn less than $40,080 as of the end of May.

Which Income Is Counted?

Wages and net self-employment income are counted. Pensions and investment income are not counted. But if you make a contribution to a retirement plan, that money is counted as income even though you may not pay income tax on it. That’s a little confusing I know but hang in there.

Social Security looks at the income you earn regardless of when you actually receive payment. So if you earn money this year but only get paid next year it won’t help you when it comes to working and collecting Social Security if you are less than Full Retirement Age.

How to Use This informationworking and collecting social security

First, if you have already reached full retirement age and still working, you can receive full Social Security benefits without worrying about suffering any penalty. I met with a client a few years back who was 67 and working. She hadn’t applied for Social Security because she was afraid that SSA would penalize her for working. When I explained that she could make her claim without giving up any of her benefits she was delighted of course. This is fairly straight forward. Let’s consider other more complicated situations.

If you are subject to this working penalty, you have to do some math to figure out if it’s worth it or not to claim benefits. The decision is very specific to your own situation. And you also have to figure that for every year you delay taking benefits, your eventual monthly income will rise 8% per year until you reach age 70. Generally speaking, if you need or want to work until your full retirement age, you are probably better off delaying Social Security benefits until you reach age 70 if your ultimate goal is to have more retirement security.

Are you working and collecting Social Security? What were your calculations?


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