It’s a common misconception that having a job in retirement means losing one’s Social Security benefits.
In fact, having a job likely won’t affect your ability to collect Social Security at all. It simply depends on whether or not you’re over your Full Retirement Age.
Once you’re over your FRA, you can work and earn as much as you’d like. It won’t change your monthly Social Security payments one bit.
What’s Your Full Retirement Age?
Knowing your FRA is obviously rather important here. For folks born between 1943 and 1954, the FRA is 66. If you were born between 1955 and 1959, the age increases by two months for every year. For those born in 1960 or later, their FRA is 67.
While you can begin collecting Social Security before you reach your FRA, but your payment amount will be lower. Unfortunately, this is permanent, so it is best to wait if you can.
Penalties You May Incur
If you begin collecting Social Security and work a job before reaching your FRA, then your income will be affected. There is a penalty for everything you earn exceeding the amount of $16,920. Once you’ve reached that limit, you’ll be required to pay $1 for every $2 earned after the first $16,920.
In other words, if you only earn $12,000, there’s no penalty. If you earn $20,000, you’ll be penalized on the difference between that and $16,920. In this case, your penalty would be $1,540.
This is, of course, why most people wait until reaching their FRA in order to avoid the financial penalties.
How Penalties are Collected
The penalties for working before your FRA but after collecting Social Security benefits do not come out of your paycheck. Instead, they are withheld from future Social Security payments.
Again, this is only if you’re under your FRA, which is likely around age 66.
After you reach your FRA, you will get the penalty money back. However, it can take ten years or even longer for you to be fully reimbursed.
To Work or Not to Work
Whether or not it’s worth it to you to work is up to you. If you’ve begun collecting Social Security early, you’ll need to plan for the penalties should you make more than $16,920.
If you plan to work in your early to mid-60s, you likely won’t want to also begin collecting benefits early.
Of course, for some of us, having a job means staying social and being involved in our communities. Therefore, it’s also important to weigh the intangible benefits like your happiness and well-being as well.
Regardless, once you reach your FRA, there’s no reason you can’t have a job and still collect your full benefits.