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Working in Retirement While Collecting Social Security?

Author: Ethan Smith

Your age can make a big difference for retirement income.

Are you below your full retirement age (FRA)?

Social Security is intended to be a retirement benefit; therefore, there are consequences for collecting your benefits early (that is, prior to your FRA and before you stop working).

If you opt to collect benefits prior to your full retirement age, you are subject to an earnings test every year until you reach FRA. If your earnings (salary and wages) exceed certain thresholds, the Social Security Administration (SSA) will withhold part or all of your benefits. The earnings limits are outlined below:

: Social Security Administration [http://www.socialsecurity.gov/retire2/whileworking.htm]

While Social Security benefits withheld due to early collection will not be refunded, they will be adjusted at FRA to account for the benefits that were withheld.

For example, if your FRA were 66 and you began collecting benefits at age 62, the SSA would have reduced your benefit by 25%. Assuming you returned to work at age 64, the SSA may have withheld two years' worth of benefits by the time you reached FRA. The SSA would then lessen your 25% reduction to give you credit for the two years of lost benefits. Your new reduction would be as if you started collecting benefits at age 64 (13.3% reduction) rather than age 62.

If you are below FRA and working, here is what you'll get in Social Security:

If your monthly SS benefit is:

And you earn:

You will receive yearly benefits of:

$700

$15,480 or less

$8,400 (full benefits)

$700

$16,000

$8,140

$700

$20,000

$6,140

$900

$15,480 or less

$10,800 (full benefits)

$900

$16,000

$10,540

$900

$20,000

$8,540

$1,100

$15,480 or less

$13,200 (full benefits)

$1,100

$16,000

$12,940

$1,100

$20,000

$10,940

: Social Security Administration [http://www.socialsecurity.gov/pubs/EN-05-10069.pdf]

Are you at full retirement age or above?

Once you reach your FRA, you may keep all of your benefits, no matter how much you earn. In addition, the SSA will automatically recalculate your Social Security benefits each year you continue to work. So, if your current retirement income is greater than your previously calculated best 35 years, your benefits will be automatically adjusted upward.

The Bottom Line

The age at which you begin receiving Social Security benefits has a large impact on your retirement income. Working while receiving early Social Security benefits may also lead to smaller payments, meaning you might be facing a notably reduced monthly benefits check in your early 60s.

Learn more:

  • How Work Affects Your Benefits, SSA Publication
  • SSA Retirement Planner: Getting Benefits While Working
  • Strategies for Collecting Social Security Retirement Benefits
  • Understanding Social Security Retirement Benefits
  • FAQs

The above commentary is based on Social Security laws in effect as of July 2014. Congress has made changes to the laws in the past, and can do so at any time in the future.

This material is provided for educational purposes only and is not intended to constitute investment advice or an investment recommendation within the meaning of federal, state, or local law. You are solely responsible for evaluating and acting upon the education and information contained in this material. BlackRock will not be liable for any direct or incidental loss resulting from applying any of the information obtained from these materials or from any other mentioned. BlackRock does not render any legal, tax or accounting advice and the education and information contained in this material should not be construed as such. Please consult with a qualified professional for these types of advice.

Investopedia and BlackRock have or may have had an advertising relationship, either directly or indirectly. This post is not paid for or sponsored by BlackRock, and is separate from any advertising partnership that may exist between the companies. The views reflected within are solely those of BlackRock and their Authors.

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