RETIREMENT • Read Time: 4 min
How Will Working Affect Social Security Benefits?
And that possibility raises an interesting question: how will working affect Social Security benefits?
The answer to that question requires an understanding of three key concepts: full retirement age, the earnings test, and taxable benefits.
Full Retirement Age
Most workers don’t face an “official” retirement date, according to the Social Security Administration. The Social Security program allows workers to start receiving benefits as soon as they reach age 62 – or to put off receiving benefits up until age 70.
Earnings Test
Starting Social Security benefits before reaching full retirement age brings into play the earnings test.
For example, let’s assume a worker begins receiving Social Security benefits during the year he or she reaches full retirement age. In that year, before the month the worker reaches full retirement age, the worker earns $65,000. The Social Security benefit would be reduced as follows:
| Earnings above annual limit | $65,000 – $50,520 = 14,480 |
| One-third excess | $14,480 ÷ 3 = $4,827 |
In this case, the worker’s annual Social Security benefit would have been reduced by $4,827 because they are continuing to work.
Taxable Benefits
Once you reach full retirement age, Social Security benefits will not be reduced no matter how much you earn. However, Social Security benefits are taxable.
There are many factors to consider when evaluating Social Security benefits. Understanding how working may affect total benefits can help you put together a program that allows you to make the most of all your retirement income sources – including Social Security.
Source: Social Security Administration, 2021
1. EBRI.org, 2021
2. SSA.gov, 2021
3. SSA.gov, 2021
4. SSA.gov, 2021
The content is developed from sources believed to be providing accurate information.The information in the material in not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professional for specific information regarding your individual situation. The opinions expressed and material provided are for general information, should not be considered a solicitation for the purchase or sale of any security.
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