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Social Security and Retirement Earnings: How Working Post-Retirement Affects Your Social Security Benefits Thumbnail

Social Security and Retirement Earnings: How Working Post-Retirement Affects Your Social Security Benefits

Once you retire, you will gain back the most valuable asset that you had to give up for your career and other goals – time. With this, you’ll have the luxury to pursue your benched passion, or hey, that pipe dream may not be impossible after all!

Retiring doesn’t always mean embarking on a road trip in an RV or spending the rest of your days tending to your garden. It can also be an opportunity to explore alternative career options, try your hand at a new career, or work part-time to add a little extra cash to your bottom line every month.

However, continuing to work while collecting social security can affect your monthly benefits if you claim these before your full retirement age (FRA). Here are some of the things you should know.

Women Reading A Printed Document — Retirement

Your full retirement age depends on the year you were born, so make sure you're aware of this criterion before you claim benefits.

The Social Security earnings limit depends on your age. Your full retirement age is based on the year you were born. The full retirement age for anyone born between 1943 and 1954 is 66 years old. Individuals born in 1960 or later have a full retirement age of 67.

The first and most important thing to know is that once you reach full retirement age, or age 70 (the maximum age at which you can continue to accrue benefits), there is no limit to how much you can earn. Once you've reached full retirement age, you are fully vested in the social security system, so your benefits won't be reduced.

Old Man Painting Outside The Establishment

You may think that you’re cheating retirement if you retire at 62 and work part-time, or provide consultancy services on the side, because you’ll have additional income on top of your social security.

However, doing so will reduce the amount you’re supposed to receive monthly from social security. If you opt to work while receiving social security before your full retirement age, you will only be able to receive a certain level of income before your benefit is temporarily reduced. In 2022, the social security earnings limit is $1,630 per month, or $19,560 per year, for someone who has not reached full retirement age. If you earn more than this amount, you can expect to have $1 withheld from your social security benefit for every $2 earned above the limit.

Meanwhile, if you reach your full retirement age during 2022, the deduction will be $1 for every $3 that you earn in excess of $51,960 until you reach FRA.

But here’s the good news…

Social Security Benefits Application Form

That’s right! You may not be able to enjoy your full monthly benefits now, but all of the amount that’s been withheld will be paid back to you by the Social Security Administration once you reach your FRA. This can be in the form of check payments or by increasing your monthly benefit from that point on, until the money’s been fully paid.

The Bottom Line:

The beginning of retirement may feel like an uncomfortable place to be in. You’ve spent years working for your future, then all of a sudden, you have all this time on your hands. So it’s no surprise that you’d want to put all that into something productive like working, albeit with some trade-offs on your social security benefits.

Here are some tips to sustain the lifestyle you envisioned for your retirement:

  1.  Continue to delay taking social security benefits until your full retirement age or later.
    In contrast to taking your social security benefits early, delayed retirement will increase the amount you will receive at a graduated rate, depending on the number of months between your FRA and your age upon claiming, ranging from 100.7% to 132% at age 70 or later.

  2. Do not rely solely on your social security benefits.
    There are other investment options and retirement plans which you can consider like 401(k)s, IRAs, and more. Seek the advice of your financial advisor, to review your situation and determine the retirement strategy that suits your financial goals.

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The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your financial advisor, attorney, or tax advisor.  For additional information and disclosures, please visit our website at mbewealth.com.  MBE Wealth Management, LLC is a registered investment advisor.

Austin Lins

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.