Working while collecting Social Security has become a popular choice for those approaching retirement, but is it the right choice? If you’ve been thinking about receiving Social Security benefits early, this is your episode! There are seven things you need to know before making this decision. I’m going to walk you through each of them so you can get all the facts and set yourself up for retirement success!

  You will want to hear this episode if you are interested in...

• Social Security recap [1:24] 
• Is there a limit to how much Social Security you can receive by working and collecting early? [2:24]
• Practical examples of Social Security withholding [4:07] How does all this work? 
• What income counts towards social security withholding? [7:48] 
• The special rule you HAVE to know [9:15] 
• Should you report income changes to Social Security? [10:26]
• Are withheld benefits gone forever? [11:13]

  Know your limits

Ideally, everyone should wait until their full retirement age before collecting social security benefits. If possible, I recommend waiting until age 70 to collect the highest amount owed to you. But life happens! Sometimes it makes more sense to collect early than to wait, depending on your circumstance. If that’s the case, you need to know how your benefits are limited/withheld when you decide to start collecting early while still working and earning additional income. Let’s take a look:

• Limit 1: Between 62 and the year you reach full retirement
• 2021 Earning Limit: $18,960
• 2022 Earning Limit: $19.560
• Amount Withheld: $1 of every $2 over the earning limit (50% penalty)
• Limit 2: Within the year you reach full retirement
• 2021 Earning Limit: $50,520
• 2022 Earning Limit: $51,960
• Amount Withheld: $1 of every $3 over the earning limit (33.33% penalty)

  Make it count

A question I often get regarding collecting Social Security benefits early is “What income counts towards withholding?” The short answer is: only earned income. Things like investment income, pension income, and other forms of passive income will not be penalized. If you are self-employed, only your net income counts as earned income. If you contribute to a 401k or a retirement plan, you don’t have to worry about paying taxes on that money, but anything that reduces your net pay will count towards Social Security withholding.

What about changes in income? Should I report that to the Social Security Administration (SSA)? Surprisingly, this question is often a follow-up to the first one. The answer is a resounding YES. Failing to report income or changes in income to the SSA can result in a stoppage of Social Security benefits until the issue is resolved, or worse, a requirement to pay back benefits received under false pretenses. Bottom line: be honest and plan well so that you don’t find yourself in a difficult situation.

Resources Mentioned

• Collect Social Security Now or Wait? Ep #4 (Podcast Episode)
• Cost-of-Living Adjustment (COLA) Information
• Retirement Earnings Test Calculator
• How Work Affects Your Benefits (PDF) 

 

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