What happens if I draw Social Security before my full retirement age and continue to work?
If you start your benefits before your full retirement age, your benefits are reduced a fraction of a percent for each month before your full retirement age.
You can get Social Security retirement benefits and work at the same time, before your full retirement age. However, your benefits will be reduced if you earn more than the yearly earnings limits.
After you reach your full retirement age, they will recalculate your benefit amount to give you credit for any months you did not receive a benefit because of your earnings. They will send you a letter that explains any increase in your benefit amount.
If you delay filing for your benefits until after full retirement age, you will be eligible for delayed retirement credits that would increase your monthly benefit. If you also continue to work, you will be able to receive your full retirement benefits and any increase resulting from your additional earnings when they recalculate your benefits. Once you reach full retirement age, your earnings do not affect your benefit amount.
What happens if I work and get Social Security retirement benefits?
You can get Social Security retirement benefits and work at the same time. However, if you are younger than full retirement age and make more than the yearly earnings limit, they will reduce your benefit. Starting with the month you reach full retirement age, they will not reduce your benefits no matter how much you earn.
Social Security uses the following earnings limits to reduce your benefits:
If you are under full retirement age for the entire year, they deduct $1 from your benefit payments for every $2 you earn above the annual limit.
*For 2023 that limit is $21,240.
In the year you reach full retirement age, they deduct $1 in benefits for every $3 you earn above a different limit, but only count earnings before the month you reach your full retirement age.
If you will reach full retirement age in 2023, the limit on your earnings for the months before full retirement age is $56,520.
Starting with the month you reach full retirement age, you can get your benefits with no limit on your earnings.
What counts as earnings:
When they figure out how much to deduct from your benefits, they count only the wages you make from your job or your net earnings if you're self-employed. They include bonuses, commissions, and vacation pay. They don't count pensions, annuities, investment income, interest, veterans, or other government or military retirement benefits.
Your benefits may increase when you work:
As long as you continue to work, even if you are receiving benefits, you will continue to pay Social Security taxes on your earnings. However, they will check your record every year to see whether the additional earnings you had will increase your monthly benefit. If there is an increase, they will send you a letter telling you of your new benefit amount.
When you’re ready to apply for retirement benefits, give me a call and I will help you with all of this.