Millions of Americans are or will be depending on their SSI benefits as their primary income source. However, Americans are allowed to draw their benefits upon hitting their retirement date while continuing to work. The information below will discuss how working while receiving benefits works.
The choice to begin receiving your benefits at the earlier age will result in you earning a lower monthly amount over the rest of your lifetime.
When Social Security Retirement Benefits Begin
If you were born after 1937, you are eligible to apply for and start receiving your Social Security retirement benefits at the age of 62. However, you will not be eligible for full SSI retirement benefits until between the age of 66 and 67. This depends on the year you were born. For example, if you were born in 1955 you can receive full benefits at the age of 66. Two months are added for every birth year afterwards until the full retirement age reaches 67. The choice to begin receiving your benefits at the earlier age will result in you earning a lower monthly amount over the rest of your lifetime.
What Is Full Retirement Age?
Waiting until you reach full retirement age has its benefits. For those born between 1943 and 1954, the full retirement age is 66. Born in 1955? Then your full retirement age is 66 plus 2 months. For each year until 1960, add 2 months. For anyone born in 1960 and after, you will reach full retirement age at 67 years old.
Thinking About Working While Receiving Social Security?
For a variety of reasons, both 62 and 67 are quite young by American standards. Many people are still quite active during this time. In fact, a lot of people want to keep working. Additionally, SSI benefits seldom provide enough money for an individual or couple to live on based on their established standard of living. For these reasons, The Social Security Administration (SSA) issues certain guidelines. This provides a path for people to continue working while drawing Social Security benefits prior to reaching full retirement age.
Social Security Benefits and Working
In a perfect world, an individual will have a pension and 401K savings to live on with their Social Security benefits acting as extra source of income. The reality is you may need to work at least part-time to make ends meet. If so, you need to understand the following guidelines and how they will affect the amount of your monthly benefits.
Please note the following information is applicable to 2021 only.
Guidelines for Individuals Under Full Retirement Age All of 2021
If you will be under the age of full retirement (ages 66 to 67) for all of 2021, you can earn working income of up to $18,960. in the calendar year without it affecting the amount of your monthly benefit. For every $2 of working income you exceed that amount during the calendar year, the SSA will reclaim $1 of your SS benefits.
Example: You are 63 years old and receive working income of $20,000 during 2021. That puts you $,1040.00 above the SSA’s threshold. Your yearly benefits will be reduced by $520.00.
Social Security Benefits Reduced Only Temporary
There is good news, however. Benefits that are reduced because of your working income are only temporary. Once you reach the age of full retirement, your benefit amount will be recalculated. In other words, you will receive credit for the amount withheld and your earnings. You will see this reflected in the amount of your check.
Therefore, if your health permits and you are able to continue working until your full retirement age, you will definitely make out better in the long run.
Guidelines for Individuals Who Reach Full Retirement During 2021
If you hit full retirement age (66 to 67 years old) during 2021, The rules are different. The amount of working income you can make without affecting your SSI monthly benefit is $50,520 annually. Only the amount you earn in the months prior to reaching full retirement age will be applicable. For every $3 of working income that you exceed the limit, $1 will be deducted from your SS benefits the following year.
Example: You will hit full retirement age in August. From January through July, you earn $55,000. That puts you $4,480 above the SSA’s threshold. The SSA will reduce your benefits for the next year by $1,027 ($3,080 / 3).
From the month you reach full retirement and afterword, you can earn as much working income as you want without affecting your monthly SS benefits. There are no longer any limits on your earnings.
What Incomes Are Used Used in the Earnings Test?
Not all of your annual income is included in SSA’s earnings test. It’s only applicable to your working income, which is defined as gross wages paid from your salary or the net income you earn from self-employment. Forms of income that are excluded from the calculation include gambling, pension, interest, investment income or money from inheritances.
Working while collecting social security can improve your life style in retirement. However, be sure to do your homework and decide how much you should earn versus waiting to retire until you have reached the age of full retirement.