When you receive your Social Security retirement or survivor’s benefits, you can work and it can be very beneficial. However, there is the question of how much one can earn while on Social Security at age 62. Keep in mind that working while retired could affect your payments, so you need to know how to do it properly.
The Social Security Administration will always review beneficiary records each year. In the event that you have higher earnings in the last year, you will have to recalculate your benefit and the appropriate increase will be paid. This increase will be retroactive to January of the following year.
However, there are limits to how much you can earn and keep all the benefits because this will not apply to all cases.
What is the Social Security benefit limit?
When you have less than full retirement for the entire year, the Social Security Administration will deduct $1 from benefit payments for every $2 earned above the annual limit. By 2024, the limit will be $21,240.
When retirement age is reached, $1 in benefits will be deducted for every $3 earned above a different limit. In these cases, the earnings limit for 2024 will be $56,520, and only earnings through the month before full retirement age count, not earnings for the entire year.
In cases where earnings are above the yearly limit, and benefits are received for part of the year, there is a special rule that applies to a year’s earnings. The special rule will allow you to pay a full Social Security benefit for the months you are considered retired, regardless of annual earnings.
Can benefits be recalculated?
Upon reaching retirement age, earnings will no longer reduce benefits no matter how much is earned. The benefit amount is recalculated to give you credit for the months that reduced or withheld benefits for excess earnings.
When the Social Security Administration reduces earnings from benefits, they only count wages earned from work or net earnings if self-employed. They include bonuses, commissions, and vacation pay, not counting pensions, annuities, investment income, interest, and veterans’ benefits, among others.
If you are eligible for retirement benefits and are still working, income from this work may affect your benefits. However, they must always exceed each year’s limit for such deductions to be made.
The limit you can earn without seeing any reduction in your Social Security benefit is $21,240 as mentioned above. But, things change when you reach full retirement age when the earnings limit increases and benefits will be reduced by a smaller amount.
How are the profit limits applied?
There are different considerations regarding earnings limits so as not to affect your Social Security payments. Among these will be:
- The limit will apply only if Social Security is claimed before full retirement age.
- It is a limit that increases for the calendar year in which full retirement age is reached.
- When you reach full retirement age, there is no income limit. Benefits will not be reduced regardless of income.
- The earnings limits apply to earnings from wages or self-employment. Pension, annuities, and investment income will not count.
Can the Social Security reduction be recovered?
The reduction of the earnings limit is temporary and you end up recovering the money over time. If retirement age is reached, the benefit increases to compensate for the reduction in the earnings limit.
In cases where Social Security is claimed early, there will be a permanent reduction in benefits. For this reason, the ideal is to wait until full retirement age, in order to avoid the loss of benefits that can occur in these cases.
What is the full retirement age for Social Security?
As we have already said, once you reach full retirement age you will not have any limits on the earnings you can have. However, it should be noted that for people born between 1943 and 1954 the retirement age is 66 years old.
However, this will be increased by a few months for those born between 1955 and 1959. For those born in 1960 and later the retirement age is 67 years of age. In all cases, if you start receiving benefits before the full retirement age you could impact your benefits. For this reason, it is recommended that you do not file prematurely for Social Security so that you can enjoy all the benefits you will have.
If you work, will Social Security benefits be taxable?
If you are already receiving Social Security benefits, you should be aware that earned income, IRAs, or 401(k)s, may contribute to making part of your Social Security payments taxable.
Gross income, non-taxable interest, and one-half of your Social Security benefits will be taken into account. If this is more than $25,000 for an individual or $32,000 for married couples, you may have to pay tax on 50% of your Social Security payments.
But, if your income is more than $34,000 or $44,000 for couples, taxes may be payable on up to 85% of your Social Security payments.
Can I work and receive Social Security benefits?
It is possible to work and receive Social Security benefits at the same time. However, if you are younger than your full retirement age, part of your Social Security payments may be temporarily withheld if you earn too much money.
However, when you reach your full retirement age, there will be no penalty for working and receiving Social Security benefits. In addition, your payments will be increased to give you credit for benefits that were withheld in the past.
However, you should consider that, depending on your income, you may have to pay taxes. For this reason, people who have high incomes will normally end up paying taxes on the benefits received through Social Security, without this affecting the benefits at all.
REFERENCES
- Hartman, R., Marquardt, K., & Snider, S. (2023, August 11). What happens if you work while receiving social security? US News & World Report. https://money.usnews.com/money/retirement/social-security/articles/what-happens-ifyou-work-while-receiving-social-security
- (2023, May 11). Social Security Earnings Limit 2024: How much can you earn at 62 and not affect SS? MARCA. https://www.marca.com/en/lifestyle/usnews/2023/05/11/645cf73822601d3b638b45c2.html
- Yahoo is part of the Yahoo family of brands. (n.d.). https://finance.yahoo.com/news/askadvisor-much-money-earn-172524045.html