Many people in retirement want to work a part time job while in retirement. They may want to do this for various reasons, such as wanting or needing the income, working for the health insurance benefits before Medicare kicks in or simply to stay occupied and get out the house and meet people. Whatever the reason may be, if you are considering working while in retirement and you want to begin receiving your social security benefits at the same time there are some things to consider before making the decision.
It is possible to begin receiving your social security benefits and work at the same time.
However, your benefits may be reduced depending on when you start receiving your social security benefits and how much you make from a job while you are receiving those benefits.
To help you make the best decision you need to know how much you will be making from your job in retirement (I know that sounds like an oxymoron) and what your full retirement age is. Your full retirement age is determined by your birth date. If you take your benefits before your full retirement age, then your benefits will be reduced if you make more than allowed limits.
For 2023, if you work before your full retirement age then the Social Security Administration (SSA) will deduct $1 from your benefit payments for every $2 you earn above the allowed limit of $21,240. This means that if you make less than $21,240 then there will be no reduction in benefits for you, but if you make more than that amount from your job in retirement then you will be subject to the reduction of benefits.
In the year that you reach your full retirement age, for the months leading up to your full retirement age, there is a different limit allowed for you to earn before there is a reduction in benefits, and if you exceed the limit then there is a different reduction amount in your benefits. If the months of the year leading up to your full retirement age SSA will deduct $1 in benefits for every $3 you earn above $56,520.
For example, if your full retirement age is 67 and you turn 67 in June of this year then for January, February, March, April and May you will see a reduction in benefits by $1 for every $3 you make above $56,520 from your job. If you make less than $56,520 then you have no reduction in benefits.
Now for some good news. Once you reach your full retirement age there is no limit on how much you can make from your job and there will be no reduction in benefits.
It is important to note that the SSA counts wages you earn from your job and any net earnings you have from self-employment. Income from pensions, annuities, investment income, interest and VA or other government benefits are not counted toward these calculations.
The bottom line, is that there is some planning that needs to be done if you plan on working either from a job or self-employment, and you plan on taking your social security benefits before you reach your full retirement age. Once you reach your full retirement age, you are free to work as much as you’d like with no reduction in benefits for you.