by Stephen Reed | Accounting News, News, Newsletter, Retirement, Social Security
If you’re nearing retirement and thinking about staying in the workforce, even part-time, you’re not alone. But if you plan to collect Social Security while still working, it’s important to understand how your earnings could affect your benefits. Here’s what you should know before making any decisions.
The Earnings Limit
If you claim Social Security before reaching your full retirement age (FRA) and you continue to work, the Social Security Administration sets an annual earnings limit. In 2026, if you earn more than $24,480, you’ll have $1 withheld for every $2 you earn above that threshold.
So, for example, if you earn $30,480 ($6,000 over the limit), Social Security will withhold $3,000 from your benefits for the year.
The rules get a little more forgiving if you hit your FRA by December 31. If you earn more than $65,160, you’ll have $1 in Social Security withheld per $3 of income.
Once you reach FRA, the earnings limit no longer applies. You can earn as much as you want without worrying about any reduction to your monthly benefit.
It’s important to note that “withheld” doesn’t mean “gone forever.” The Social Security Administration recalculates your benefit when you reach FRA and credits you back for months when benefits were withheld. So you will eventually recover that money.
Why Waiting Could Make Sense
If you plan to continue working in retirement, you may want to consider delaying Social Security.
Claiming benefits early permanently reduces your monthly payment, but every year you delay past 62 (the earliest claiming age), your monthly benefit grows. Waiting longer can increase your monthly income for life. And if you delay benefits beyond the full retirement age, your benefit grows until age 70.
For people who are still working and don’t need the income right away, delaying Social Security can be an effective way to lock in a large income stream later in retirement.
Other Ways Work Can Increase Your Benefits
Social Security calculates benefits using your highest 35 years of earnings. If you’re still working and earning more than you did in earlier years, those higher earnings may replace lower-income years, which can increase your future benefit amount.
The Social Security Administration reviews earnings records annually and makes adjustments when appropriate.
How to Maximize Your Social Security Benefits
Getting the most out of your benefits requires a little planning. A few things to keep in mind:
- Review your Social Security earnings record regularly and correct any errors.
- Understand your full retirement age and how claiming early will affect your benefits.
- Think about delaying benefits if you plan to keep working.
- Factor in life expectancy, health, and other retirement income sources.
- For married couples, understand how coordinating your claiming strategies can maximize benefits.
- The Social Security Administration’s website (ssa.gov) has a free calculator that shows your projected benefit at different claiming ages.
Planning for Peace of Mind
Social Security remains a key source of retirement income for millions of Americans, but choosing when you claim benefits can have a lasting impact on your financial security in later years.
If you intend to work in retirement, make sure you understand the earnings limits and how they apply to your situation. With a little planning, you can time your benefits to work in your favor.
by Daniel Kittell | News, Newsletter, Retirement, Retirement Savings
As you approach retirement, understanding your Social Security benefits becomes crucial for financial planning. Your benefit amount hinges on factors like earnings history and age at sign-up. With careful planning and strategic decision-making, you can maximize your Social Security benefits to ensure financial stability in your golden years. Here are proven strategies to help you make the most out of your Social Security benefits.
Delay Your Claim
One of the most effective ways to increase your Social Security payments is by delaying your claim beyond your full retirement age (FRA). For each year you delay claiming benefits, your payments could increase by up to 8%, until you reach the age of 70. After age 70, there is no additional benefit for waiting to claim benefits.
Stay in the Workforce Until FRA
You can begin collecting Social Security payments at age 62. However, opting for this early withdrawal results in reduced monthly payments, while waiting until FRA provides higher monthly payments.
FRA is age 66 for those born between 1943 and 1954, gradually increasing in two-month increments thereafter. Individuals born in 1960 or later reach FRA at age 67. Claiming benefits before you reach FRA results in a permanent deduction.
Maximize Earnings
Be strategic about when you earn your highest income. Since Social Security benefits are based on your highest 35 years of earnings, consider working overtime, asking for a raise, taking on side jobs, or seeking higher-paying jobs in the years leading up to retirement.
There is a maximum earnings threshold – adjusted each year for inflation – which is used to calculate Social Security benefits. In 2024, earnings up to $168,600 are used to calculate retirement benefits. However, any income beyond this threshold isn’t subject to Social Security tax and won’t influence future benefit payments in retirement.
Claim Spousal Benefits
Married individuals have the option to claim spousal benefits based on their spouse’s work record, which can be up to 50% of their spouse’s benefit amount. This can be particularly advantageous if one spouse has significantly higher earnings. The lower-earning or nonworking spouse needs to sign up for spousal payments at his or her FRA to get the 50% spousal payment. The percentage is reduced if this spouse starts benefits before their FRA.
Coordinate Spousal Benefits
Spouses can strategize to maximize their combined Social Security benefits by coordinating when each spouse claims their benefits. This may involve one spouse delaying their claim while the other claims benefits, allowing the delayed benefits to grow.
Know Retirement Earning Limits
If you claim Social Security before reaching FRA and continue to work, a portion of your benefit might be temporarily withheld.
In 2024, Social Security recipients under FRA earning over $22,320 will see $1 withheld for every $2 earned beyond this threshold. At full retirement age, the earnings limit rises to $59,520, with a penalty reduction to $1 withheld for every $3 earned above this limit.
Upon reaching full retirement age, you can work while receiving Social Security without penalty. Your benefit will be recalculated, accounting for any previously withheld payments and your ongoing earnings.
Minimize Social Security Taxes
Be aware of the tax implications of your Social Security benefits. Depending on your adjusted gross income, a portion of your benefits may be subject to federal income tax. Careful strategizing, like minimizing other sources of taxable income, can help reduce the taxation of your Social Security benefits.
Maximize Survivor’s Benefits
Surviving spouses are entitled to receive the higher of their own benefit or their deceased spouse’s benefit. If your spouse received the higher benefit, you might qualify to claim your spouse’s survivor benefit initially, letting your own benefit accrue, and then transitioning to your benefit later in life. By understanding the rules surrounding widow/widower benefits, you can ensure you receive the maximum amount possible.
