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4 Things to Know About Working While Drawing Social Security



If you’re nearing retirement, you’ve probably got an idea of what your monthly Social Security benefit will be at age 62, the earliest age you can begin drawing Social Security, your full retirement age or at age 70, when you would receive the maximum benefit. Depending on your circumstances, it’s generally better to wait to draw Social Security until at least your full retirement age, since the benefit will be reduced by about 30 percent if you take Social Security at age 62.

However, if you plan to continue working – even part-time – after you begin drawing Social Security, it’s important to understand how working will affect your monthly benefit, tax liability and future Social Security benefit amount.

Find out four important facts about drawing Social Security retirement benefits while working below…

1. Social Security has an annual earnings limit

When you work while drawing Social Security before your full retirement age, you can earn only so much before the Social Security Administration (SSA) reduces your monthly benefit amount. In 2021, the annual earnings limit is $21,240. If you earn more than the annual earnings threshold, the SSA will reduce your monthly benefit by deducting $1 for every $2 you earn above the annual limit.

In the year you turn full retirement age, during the months leading up to your birthday, the SSA will deduct $1 for every $3 you earn at a job. This limit in 2023 is $56,520.

Find out: 5 Questions to Ask Before Drawing Social Security

2. Your earnings limit changes at full retirement age

Once you reach your full retirement age, you can receive your Social Security benefit with no limit on the annual amount you can earn at a job. For example, if you turn 62 in 2023, your full retirement age is 66 and 10 months. After the month you reach your full retirement age, you can earn as much as you like annually without having your monthly benefit reduced. To find your full retirement age, visit the SSA’s retirement age calculator.

When the SSA determines how much to deduct from your benefit, it counts wages you earn from a job, including bonuses, commissions or vacation pay, or your net earnings if you’re self-employed. Pensions, annuities, investment income, interest, veterans or other government or military retirement benefits aren’t included.

Find out: 6 Crucial Dates for Retirement Planning 

3. You’re credited for withheld money later

It may seem like a raw deal that the SSA reduces your benefits before full retirement age if you earn more than the annual limit. But earning over the annual threshold before your full retirement age isn’t all bad news. That’s because once you reach your full retirement age, the SSA will recalculate your benefit amount, adding in the deducted amount and increasing your monthly benefit checks.

Find out: 7 Reasons to Work Part-Time in Retirement

4. You may have to pay income tax on your Social Security benefit

When you earn money at a full-time or part-time job on top of your monthly Social Security benefit, you may have to pay federal income taxes on the benefit. “This usually happens only if you have other substantial income in addition to your benefits (such as wages, self-employment, interest, dividends and other taxable income that must be reported on your tax return),” according to the SSA.

You may have to pay federal tax on up to 50 percent of your Social Security benefits if you file a federal tax return as an individual and earn between $25,000 and $34,000 in combined income (nontaxable interest + half of your Social Security benefit = combined income). If your combined income is more than $34,000, up to 85 percent of your benefits may be taxable.

If filing a joint return with a spouse, you may have to pay federal income tax on up to 50 percent of your benefits if your and your spouse’s combined income is between $32,000 and $44,000. If combined income is more than $44,000, up to 85% of your Social Security benefits may be taxable. If you’re married and file a separate return, you’ll probably also pay taxes on your benefits, according to the SSA.


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