There are many occasions after retirement, either due to opportunity, need, or sheer boredom, that a retiree may decide to go back into the workforce.
If you’re receiving a Social Security benefit and working, and you are younger than full retirement age, you need to be aware of the impact of that work income on the receipt of your Social Security benefit.
Here is the language that Social Security uses to describe the benefit reduction:
In 2018, the annual earnings limit is $17,040 if you’re under full retirement age. If you will reach full retirement age in 2018, the limit on your earnings for the months before full retirement age is $45,360.
Starting with the month you reach full retirement age, there is no limit on how much you can earn and still receive your benefits.
As you can see, that doesn’t provide much work income before benefits begin to be reduced. For every two dollars of income over the threshold above one dollar of Social Security benefit is delayed/reduced.
If you elect your Social Security benefit and you are before full retirement age, the Social Security Administration will ask you to estimate your work income. They will use this information to determine the actual amount of benefits that they will distribute.
If you actually make more than you claim that you make, later IRS reporting to the Social Security administration will bring this to light. Once the discrepancy is known, you will receive a letter from the Social Security Administration outlining the number of months that you will forgo a Social Security benefit until the excess work earnings are made up.
The good news about the benefit reduction is that the Social Security Administration will reevaluate your benefit once you reach Full Retirement Age. For every month that your benefit was eliminated due to income above the threshold, the SSA will add a month of delay to your Social Security benefit calculation.
That means that although there will be inconvenience of having a reduced benefit due to working and receiving a Social Security income, once you reach full retirement age, the scales will balance out and you will get most of or all of what you truly deserve moving forward.
If you have any questions please feel free to contact me.
