Posted by James Financial Services Inc

What Happens if You Work Part-Time While Receiving Social Security?

What Happens if You Work Part-Time While Receiving Social Security?

Choosing a part-time retired job is an easy way to improve your retirement lifestyle. But before you start a retired job, we recommend that you check the numbers to see how your Social Security benefits might change.

If you start a new job after you start receiving Social Security benefits, the payments to which you are entitled may change. If you receive income from social security while you are working:

  • Social security benefits may be temporarily reduced.

  • The social security income limit depends on your age.

  • The amount you earn can affect the benefits you receive.

  • You may later be entitled to a higher social security benefit.

Read on to understand the consequences of working while receiving Social Security benefits.


Consider your social security full retirement age

Once you reach full retirement age, there is no limit to how much you can earn while receiving Social Security benefits. Your full retirement age is based on the year you were born. The full retirement age for people born between 1943 and 1954 is 66. People born in 1960 or later have a full retirement age of 67.

If you reach full retirement age, you can earn as much as you want without affecting your Social Security benefits. If you have not reached full retirement age and are receiving social security benefits, you will be subject to income limits.


How much can you earn while receiving social security?

If you choose to work while receiving Social Security before full retirement age, you may only be able to receive a certain level of income before you temporarily reduce your Social Security benefits. The Social Security income limit is $1,580 per month or $18,960 per year in 2021 for someone aged 65 or younger. If you earn more than this amount, you can expect to see $1 deducted from your Social Security benefit for every $2 you earn over the limit.

For example, suppose you are 65 and reach full retirement age in 2023. If you receive $2,500 in Social Security benefits per month and have a job that earns $2,000 per month, you are over your income limit of $ 1,580 by $420 per month. You will earn $24,000 of work for one year, which is $5,040 more than the annual income limit of $18,960. Therefore, $1 for every $2 will be withheld. In this case, $210 will be withdrawn each month from social security checks. You can expect to receive $2,290 per month from Social Security. When you reach full retirement age, your payments will be recalculated to credit the withheld portion of your benefit.


The social security income limit changes the year you reach full retirement age.

There is a different limit on Social Security earnings for those reaching full retirement age in 2021, and the penalty for over-earning is lower. If you reach full retirement age in 2021, your limit is much higher.

The Social Security income limit increases to $4,210 per month or $50,520 per year the year you reach full retirement age. If you earn more than this amount, $1 of your benefit will be withheld for every $3 of excess earnings.

For example, if you reach full retirement age in 2021 and currently receive $2,500 per month from Social Security plus $4,500 per month from employment, part of your benefits will be temporarily suspended. Your income exceeds the Social Security income limit by $290. You can expect your benefits to decrease by about $97 each month, like $1 for every $3 earned over the limit will be withheld until you reach the age limit.


Social security contributions are only withheld temporarily.

When your money is withheld from Social Security checks, your benefit will be recalculated when you reach full retirement age to give you credit for source deductions and your continuing income. If you are working while receiving benefits and have not yet reached full retirement age, the amount that was deducted from your Social Security will be added back to your checks. This is a great payment to consider if you are still healthy and able to work during your early retirement.


Work can make your social security taxable

If you are receiving Social Security benefits, be aware that any income you earn from working, withdrawals from traditional IRA or 401 (k) accounts, as well as dividends and interest on your investments, may help tax a portion of your payments.

If the amount of adjusted gross income, tax-free interest, and half of your Social Security benefits are more than a certain amount, some of your Social Security contributions may be taxable. If you file an individual tax return and earn between $25,000 and $34,000, up to 50% of your Social Security benefits may now be taxable. For income over $34,000 ($44,000 for couples), up to 85% of the Social Security benefit may be taxed.


Can you work and receive social security benefits?

Yes, you can work and receive social security benefits at the same time. Once you reach full retirement age, there will be no work penalty as long as you are on Social Security benefits, and your payment will be increased to give you credit for benefits that were withheld in the past. However, if you have not reached full retirement age, part of your Social Security payment may be temporarily withheld if you earn a lot of money.


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