Drawing Social Security Early and Still Working?

Link Financial Advisory - Drawing Social Security Early and Still Working

Drawing Social Security Early and Still Working?

Many people decide to ‘semi-retire’ early and start taking their Social Security Retirement benefit at the earliest age possible. It’s appealing to be able to work part-time or where you have an interest or start a small business while making an income and receive Social Security retirement benefits. While early retirement and a part-time job may be of interest to you, it can affect your Social Security Retirement benefits if you aren’t full retirement age.

There’s a lot of confusion about the impact of working. You can still collect Social Security benefits, but if you earn above a certain amount, your monthly benefit will reduce. Here are a few things to know:

  • If you are drawing benefits and you are younger than your full retirement age or FRA (67 for those born after 1959), your benefit will be reduced by $1 for every $2 in earned income over $18,240 in 2020.
  • This reduces $1 for every $3 in earned income over $48,600 in the year in which you reach your FRA, but only for the months before you reach your FRA.
  • Once you reach your FRA, there will be no reduction in benefits, no matter how much earned income that you have.
  • Earned income is defined as income from work or self-employment and includes such things as your salary, any bonus, or your net self-employment income.
  • Any benefits that reduce due to too much earned income are not truly lost, and they will be added to your benefit once you reach your FRA.

Additionally, your benefit could be subject to taxes if your combined income exceeds certain thresholds. Combined income is your adjusted gross income plus one-half of your Social Security benefit plus any income earned from tax-exempt investments like muni bonds. There is no age limit and this includes income from all sources, earned or unearned.

To determine if you are at risk for reduced benefits, use the Social Security Retirement Earnings Test Calculator. Social Security can be confusing, and if you have any questions regarding your benefits, including when to claim them, contact your local Social Security Administration office to schedule a meeting.

As always, if you plan to take Social Security Retirement benefits early and continue to work, we can modify your financial plan to reflect how working may or may not benefit you.

Additional Disclosure: This article is not endorsed or approved by the Social Security Office or any other Government Agency.


Related posts

Inflation and Taxes Could Rise. Are You Ready for Retirement?

Americans are starting to see the impact of increasing prices at the supermarket and the start of inflation. Also, clothing at retail stores is depleting as manufacturing has halted, creating demand for products ordinarily accessible. Today’s economic conditions are much worse than coming out of the Great Depression. During periods economic...

Read More

2019 IRS Tax Filing & Retirement Account Contribution Extensions

COVID-19 has changed the deadline for 2019 tax filings and retirement account contributions to July 15th, 2020. The tax filing deadline change is part of the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) stimulus package for tax payors. Additionally, the closure of Social Security offices, IRS tax...

Read More

The CARES Act, RMD, and Hardship Distribution Changes

The CARES Act (The Coronavirus Aid, Relief, and Economic Security Act) became law on March 27th, 2020, and contains significant legislation for Required Minimum Distributions (RMD) for those over age 70 ½ who have already started RMD. Under previous IRS distribution laws, a minimum distribution from a pre-tax retirement...

Read More