As we age, many of us find ourselves wondering, “how much can you earn while on Social Security?” and the answer can sometimes feel complicated. It is in that spirit that we’ve put together this useful guide to answer that question and more.
We’ll go over the finer details of earning Social Security while you work. We’ll illustrate what it looks like when you’re working full time and collecting Social Security and how to calculate your benefits. If you’re wondering, can you work and collect Social Security at age 66 or can you work and collect Social Security at age 62, we have included answers for you below. By the time you reach the end of this guide, you’ll have all the keys to your questions about working while collecting Social Security and more. Read on to start learning about working while collecting Social Security benefits.
Social Security is a federal benefits program that provides some income for those who have entered retirement and their families. Social Security is also paid out to eligible disabled people as well as survivors of Social Security beneficiaries. In order to qualify for Social Security benefits, you will have had to pay into the Social Security program during your career. Based on a credit system, your payments into Social Security must earn you forty credits to qualify.
The amount of your benefits depends on a number of factors, including the sum of what you have earned working over the years, your age, and the age that you begin collecting Social Security. However, working while collecting Social Security can also affect the amount of your benefits.
Social Security alone doesn’t often provide enough income to get by in retirement. As such, some retirees choose to take on a part-time or full-time working position to supplement their benefits and make ends meet. It’s important, however, to know how employment may affect your Social Security income before you take such a step.
In this guide, we’ll walk you through everything you need to know to make an informed decision about working while collecting Social Security. We’re going to look at how to calculate your combined income, how to determine your Social Security benefits and how they may be reduced by your employment earnings and we’ll take a look at what age you need to be to collect your full Social Security benefits.
Let’s hop in and get started!
Can you collect Social Security at 62 and still work? Can you collect full Social Security and still work? How much can you earn working while collecting Social Security? These are all questions that many Social Security recipients find themselves asking when considering taking on a job to supplement their income. They are important considerations as well because they can have an effect on how much you receive from Social Security.
Working during retirement is appealing for those looking to round out their income and fill in some of the gaps left by retirement savings and Social Security. A part-time job or even a full-time job is an excellent option for increasing your income in retirement and it comes with numerous other benefits as well. It’s a way to fill your free time and meet new people. A job is also an excuse to get out of the house and get your body moving. A job keeps the mind sharp and the body in good shape and it also fights boredom. The income may be the reason why you need to take on a job, but all those other benefits can make working enjoyable for seniors and retirees.
Working, however, will impact your Social Security in several ways:
These variables can impact your Social Security and it’s important to know how before budgeting or deciding to take on a part-time or full-time job. Let’s examine how working affects your Social Security in more detail.
Can you work after you start collecting Social Security? The answer is yes. However, there are limits on how much you can make before your Social Security benefits are reduced. Before we jump into what those limits are, it’s important to note that once you have reached your full retirement age, these limits disappear. There is no cap on what you can earn while working at the same time as collecting Social Security benefits, so long as you have reached your full retirement age.
To understand what your full retirement age is, you’ll have to look at the year you were born. If you were born between 1943 and 1954, your full retirement age is 66. If your birthday is in 1960 or later, you’ll reach full retirement age at 67. Once you have reached that age, you can work as much as you want without your income impacting your Social Security benefits.
Conversely, if you are working before you reach your full retirement age and, at the same time, you’re collecting Social Security benefits, there will be limits on the amount of income you can make before your Social Security payouts are reduced. Keep in mind that these reductions are only temporary and once you reach full retirement age, you will go back to your full Social Security benefits.
How much can you earn yearly while on Social Security? The limit on working income while collecting Social Security benefits is $19,560 per year in 2022. If you are more than a year away from reaching full retirement age, each $2 you earn over that limit will result in a $1 reduction in your Social Security benefits. If you are within a year of full retirement age, that reduction changes to $1 per every $3 you earn in excess of the limits. For instance, imagine you are collecting Social Security at 62 and working still in 2022 and eligible for $9,600 in Social Security benefits for the year. If you earn $25,000 this year, that’s $5,440 over the earnings limit. In this scenario, where you’re working and collecting Social Security benefits, $2720 will be withheld from your Social Security benefits in 2022, leaving you with a payout of $6880.
If you are just a few months away from full retirement age in this scenario, the deductions would be $1 per every $3 you earn in excess of the income limits. That means your $9,600 in Social Security benefits becomes $7,787.
Once you are working and collecting Social Security at full retirement age, you will go back to receiving your full Social Security benefit.
How many hours can you work while collecting Social Security? There really is no cap on the amount of time you spend working, as your Social Security reductions are determined by the amount you earn. If you’re paid by the hour, you will have to calculate the hours you’re working to see how much income you’re earning and whether or not it exceeds the limits.
Can you work full time while collecting Social Security? The answer is an enthusiastic yes, but there are some precautions you should take to ensure you account for any deductions in your Social Security benefit. If you’re not yet full retirement age and you earn more than the limits we discussed above, your Social Security will be deducted. It’s important to sit down and calculate your potential earnings from a full time job so you can assess how much of your Social Security benefit you will still get. Doing this enables you to budget your life more accurately.
For instance, if you’re 64 and you find a full-time job that pays $36,000 per year or $3000 per month, you will have surpassed the Social Security limit on earnings. As the limit in 2022 is $19,560 annually or $1630 monthly, you will exceed the yearly limit by $16,440 and the monthly limit by $1370. If you had been receiving $2300 in Social Security benefits each month, it would be reduced by $1 for every $2 you earn over the limit. That means your monthly Social Security benefits will be reduced by $685, leaving you with a $1,615 monthly payment from Social Security. Annually, that means $27,600 in Social Security will be reduced by $8,220, leaving you with an annual Social Security payout of $19,380.
If you are just months shy of full retirement age, those deductions change to $1 per every $3 you earn over the limit. For instance, if you are collecting Social Security at 66 while still working, that means your monthly Social Security benefit becomes $1,844.
When you reach full retirement age, however, all of that changes. The limits on how much you can earn outside of Social Security are gone and you will get credit for all these deductions and start to receive your full benefit amount each month. In other words, if you start collecting social security at full retirement age and you’re still working, you will get your $3000 per month in employment earnings as well as your full $2300 per month from Social Security, bringing the total income between the two to $5,300 per month.
Calculating your earnings that come from working full-time and collecting Social Security is a good practice so you can weigh the pros and cons of more income vs. Social Security deductions. Having a good idea of what deductions are likely also helps when it comes to budgeting your month to month financials.
Can you work while collecting Social Security? The easy answer is yes. But, whether you’re collecting Social Security at 66 and still working or you’re nearing your full retirement age and considering a new part-time job, it’s crucial to understand how working will affect your income. Many seniors and retirees look for part-time jobs to supplement their retirement income so they can make ends meet. Often our savings and Social Security benefits are not enough to pay all the bills and a new job is needed. Before you jump in, however, let’s take a look at how your part-time earnings can potentially affect your Social Security benefits.
The calculations are going to work the same way as they work when you’re calculating full-time earnings and their impact on your Social Security benefits. If you are not yet at full retirement age and you’re working a part-time job while collecting Social Security benefits, there are limits on what you can earn before your benefits are reduced. Let’s take a look at a specific scenario.
Let’s imagine you’re 64 and you collect about $1500 per month or $18,000 per year in Social Security benefits. $1500 per month isn’t making ends meet, so you decide you want to supplement that income with a part-time job. Working is a great way to bring more income into the household to help get those bills paid, so you go looking for a job. Now imagine that you find and start working a part-time job that pays out $2000 per month. That’s $24,000 per year and certainly a welcome influx of cashflow for anyone on a tight budget. However, the limit for earnings while collecting Social Security benefits is $19,560 annually or $1630 per month. Your part-time job has put you $4,440 over the annual earnings limit and $370 over the limit each month. Your Social Security will be reduced by $1 for every $2 you earn over the limit, so halve the amount you’re over to find your deductions. You’re over by $4,440 per year, so your annual Social Security reduction will be $2,220. If you look at it monthly, you’re exceeding the limit by $370, so $185 will be withheld from your Social Security benefits each month. You’re left with $15,780 in Social Security benefits annually and $1315 in monthly Social Security benefits.
This scenario changes if you’re within a year of becoming your full retirement age. In this scenario, your benefits are reduced by $1 per every $3 that you earn that exceeds the income limits set out by Social Security. That means your annual Social Security benefits are reduced by $1,480, bringing it to $16,520, and your monthly benefits will be reduced by $123, bringing it to $1,377.
These deductions are temporary and you will be credited for what you had deducted once you turn full retirement age. At that point, you will begin to receive your full Social Security benefits no matter what your employment earnings are.
If you’re one of the many retirees who are collecting Social Security and still working, and you’re not quite at full retirement age, you’re likely seeing these reductions in your Social Security benefits. However, it’s important to understand that these adjustments are just temporary. This earned income rule only applies to Social Security beneficiaries who have not yet reached full retirement age. Once you do reach your full retirement age, your Social Security benefits will be recalculated and you will get credit for those reductions. The amount that was previously withheld from your Social Security benefits will be paid back out to you partially. You’ll see a little bit of it added to your payouts each year. It can take a long time and many years to fully recoup all of those reductions.
Additionally, you may also receive larger Social Security payouts once you reach full retirement age if you’ve been working. That’s because you may have continued to pay into Social Security while you were collecting Social Security and still working. The amount beneficiaries receive from Social Security is based on their lifetime earnings while paying Social Security taxes. The more of those taxes you paid, the more your benefits will be. As you continue to work, you will continue to pay Social Security taxes giving you a larger benefit.
If you are working while you are a recipient of Social Security benefits, you’ll want to keep in mind that your earnings can make your Social Security benefits taxable. Additionally, withdrawals from retirement accounts like IRAs and 401(k)s or earnings from any investments you may have can also contribute to making your Social Security benefits taxable.
Here’s how it works:
Start with half of your Social Security benefits. Add to it all of your other income, including income from employment, tax-exempt interest, IRA or 401(k) withdrawals. The sum you arrive at is your combined income.
Combined income has limits before you need to pay tax on it. In 2022, that limit is $25,000 for individuals and $32,000 for couples. Once you surpass those limits, you may have to pay at least some tax on your Social Security benefits. Once you have exceeded $34,0000 in combined income as an individual or $44,000 as a married couple, you could see up to 85% of your Social Security benefits taxed.
Your Social Security benefits may be subject to federal, state and local income taxes as well. Keep this in mind while budgeting so you have a better idea how much income you’ll be taking home.
Now that we understand that working and collecting Social Security can result in reductions on benefits, there are a few other considerations to keep in mind related to the original question, “how much can you earn while on social security?” that will help you budget or plan for your future.
The first consideration to take a close look at is your other income. Do you have investments that are earning you some supplemental income? Are you making regular withdrawals from your IRA or 401(k)? Get a good idea of what your combined income is so that you can better plan for any taxes you may have to pay. Remember that combined income is equal to half your Social Security benefits plus your adjusted gross income and any non-taxable interest you have earned.
Another consideration regarding collecting Social Security at age 62 and working (or any age before your full retirement age, for that matter), is the impact it will have on your family. If you are the primary beneficiary for Social Security benefits that your family collects, these benefits can be affected by your employment earnings as well. $1 for every $2 the primary beneficiary receives in excess of the Social Security income limits will be reduced from family benefits as well. The reductions are evenly distributed between primary and spousal or family benefits.
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