What happens to your Social Security benefits if you decide to work longer?
Working longer after you hit retirement age would lead to a larger state pension, but of course means years more of work.
Retirement is a big decision, especially so when the time chosen to retire can have a big impact on future Social Security earnings. More than ever, seniors in the US much longer into their lives than they used to.
This is particularly apt for seniors in the 2020s. Compared to 1985, over 65s are twice as likely to be in work. With a recession almost certainly approaching, expect this number to increase.
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It is possible to start receiving Social Security retirement benefits at 62, but opting to defer the payments will get you a larger monthly payment when you do decide to claim the support.
The full retirement age, depending on your year of birth, varies between 66 and 67 years old.
If you were born between 1943 and 1954, your full retirement age is 66. If year were born later than that, your retirement age will rise by two months for every year past 1954 that you were born in. For example, a worker born in 1956 would reach full retirement age when they were exactly 66 years and four months old.
The maximum full retirement age is 67 years old, no matter how long after 1954 you were born.
Once you reach 70 years old, the monthly Social Security payment stays the same. While this looks a tempting offer, there are a host of other factors to consider before retiring, such as health and family time. As the US life expectancy seems to be peaking at 78 years old, having less than a decade to sped your pension really seems like a waste.
What about working and receiving benefits at the same time?
It is possible to receive your benefits and hold down a job at the same time, though there are limits. Exceding these begins to eat into the benefits received. If you are under the age of 67, the 2022 annual earning limit is $19,560.
If you earn over this threshold, the SSA will reduce your benefits payments by $1 for every $2 you earn over it.
If you will reach full retirement age in 2022, the limit on your earnings before penalties will be $51,960. If you earn over this limit after reaching full retirement age, the SSA deducts $1 in benefits for every $3 you earn above. However, this only counts earnings before the month you reach your full retirement age.
Only the wages you make from your job are your net earnings if you’re self-employed are counted as earnings. This means a lot of money that seniors would usually rely on are exempt from this cap, including pensions, annuities, investment income amongst others.