Balancing Work and Social Security: How Hours Impact Your Benefits.Social Security retirement benefits are designed to provide financial support to beneficiaries after they have ceased working. However, there are nuances to consider when it comes to working while also receiving Social Security benefits.
Continuing to Work and Social Security Benefits
You can maintain employment while receiving Social Security benefits without immediate forfeiture. Yet, it’s crucial to acknowledge that working after claiming these benefits may lead to a reduction in the payment amount, particularly if you haven’t attained full retirement age.
Working Prior to Reaching Full Retirement Age
From the standpoint of the Social Security Administration (SSA), individuals born in 1960 or later attain full retirement age at 67. If you continue to generate income before reaching this age, the SSA categorizes you as a worker rather than a retiree. Consequently, a portion of your benefits could be withheld.
Specifically, for every $2 earned beyond a specific threshold, the SSA retains $1 of your earnings. In 2023, this earnings threshold is set at $21,240.
The amount of hours you can work while still collecting Social Security hinges on your hourly wage. To illustrate, if you earn $20 per hour, you can work up to 978 hours annually before encountering a reduction in your Social Security benefits, provided you haven’t yet achieved full retirement age. This translates to slightly over 24 weeks of work at 40 hours per week. If your wage surpasses this figure, the adjustment will be downward.
Working in the Year of Full Retirement Age
The dynamics shift in the year you achieve full retirement age. At this juncture, you can earn up to $56,520 before any benefit reduction takes place in 2023. Furthermore, benefits are diminished by $1 for every $3 earned above this earning threshold.
Working Beyond Full Retirement Age
For some, continuing to work beyond full retirement age doesn’t contradict the concept of “retirement.” It might even be a personal preference or a necessity.
Irrespective of the rationale behind your decision, the positive aspect is that after attaining full retirement age, you won’t face penalties for working. You’re entitled to receive your complete monthly Social Security benefit, regardless of the number of hours you work. Even if you opt for full-time employment or engage in entrepreneurial ventures, your earnings and Social Security payments remain intact.
Losing Social Security benefits due to continued employment can be a challenging dilemma. However, it’s important to note that this isn’t an irreversible scenario. If your benefits are reduced due to your work, they are not permanently lost. Instead, they are temporarily suspended. The SSA guarantees that any suspended benefits will be restored.
Upon reaching full retirement age, the SSA recalculates your monthly payment, augmenting it to compensate for the deferred benefits.
There’s another avenue through which you can work and still receive your anticipated Social Security payments, without deferrals. Specifically, if all your income is passive, you can earn without affecting your Social Security earnings. The SSA considers only wages, self-employment net profits, and excludes investment income, pensions, veterans benefits, annuities, interest, and certain government or military benefits from the earning computation.