Working In Retirement? What Are Social Security Earnings Limits?

Heading Into Work 2.0?

Are you considering a Second Act in retirement? Second Acts have become quite common. Several of my clients have started earning a paycheck from new gigs during their work optional years. A dentist started a side hustle based on his love for fly fishing. A former purchasing executive created a lucrative consulting business helping procurement professionals. A sales veteran actually got a job as a greeter at a Big Box store just to get out of the house.

You may be thinking about work during retirement. But if you’ve begun drawing your Social Security benefit, you need to know that there may be some real impacts on your monthly benefit check.

I am Chuck Lewandowski CERTIFIED FINANCIAL PLANNING™ professional. This is the second video in my series about Social Security retirement benefits. In episode 1, I discussed the concept of your Full Retirement Age (FRA) and its importance. Today, I’m going to talk about how your social security benefit will be affected if you choose to work before or after your FRA.  You will see that FRA has a significant influence on what you receive If you earn a paycheck after claiming your benefit.

Three Claiming Options for Social Security

There are three different scenarios depending on when you begin to receive your new employment income. For these examples, only employment income is considered. Annuity and pension income or income generated from retirement accounts or investments does not affect your Social Security payment. That income might result in higher income taxes, but it won’t affect your monthly benefit.

Let’s look at three examples.

Before Full Retirement Age (FRA)

Scenario #1 – Working Before Full Retirement Age – If you choose to work during the years before retirement age, the Social Security system will hold back some of your benefits if you make too much employment income. If you earn more than $21240 in 2023, Social Security will hold back 1 dollar for every 2 dollars that you earn over the limit. So, if you make $500 over the limit, $250 will be held back

Year of Full Retirement Age

Scenario #2 – Working During the Year You Reach Full Retirement Age – The earnings limit in the year that you reach full retirement age is $56520. You can earn this amount without penalty up to the date of your FRA. If you go over the limit prior to that date, Social Security will hold back one dollar for every 3 dollars earned.

After Full Retirement Age

Scenario #3 – Working After FRA – You can earn an unlimited amount without affecting your Social Security payment.

So, what happens to those dollars that are held back because you exceeded the limits? Are they gone forever? No, your benefit will be re-calculated once you reach full retirement age to include the held back amount.

Social Security Income is just one piece of the retirement income puzzle. What makes this puzzle so complex, is the fact that there is no off the shelf, stock solution to putting the pieces together. Retirement income planning requires a customized solution that incorporates your personal situation. If you’re interested in developing one, please give me a call and Let’s Make a Plan.

Advisory services offered through Capital Analysts or Lincoln Investment, Registered Investment Advisers. Securities offered through Lincoln Investment, Broker Dealer, Member FINRA/SIPC.www.lincolninvestment.com West Coast Financial Group, Inc. and the above firms are independent and non-affiliated. Social Security claiming advice is not offered through, nor supervised by Lincoln Investment or Capital Analysts. This material is being provided for general information and educational purposes only and should not be construed as investment, tax, accounting, or legal advice, or used as the primary or final determinant of the best strategy on how and when to claim Social Security benefits. It is strongly recommended that each individual meet with a Social Security representative who can address his/her specific situation. A wealth of information, including interactive calculators, can be found at the Social Security Administration’s website: http://www.ssa.gov/pgm/retirement.htm.