Your 2020 Guide to Working While on Social Security

Most people value Social Security for the income it provides after you’ve retired. Yet there’s no requirement that you stop working before you take your Social Security benefits.

Millions of Americans receiving Social Security benefits also have income from work, whether it’s staying in their full-time career or taking on part-time jobs in their spare time.

The Social Security Administration is happy to let you keep working and still draw Social Security benefits, but there are some rules that can apply if you retire earlier than your full retirement age.

If you make too much money as an early retiree, you might have to give back some of your Social Security checks.

Below, we’ll go through the full story of how you can get Social Security benefits even while you’re still working and how you can keep as much of that money as possible.

The 4 main ways you can get Social Security and still work
Social Security pays benefits to four types of people who are still working:

  • Workers who claim their own retirement benefits before they actually retire.
  • Spouses who claim benefits based on a spouse’s work history.
  • Surviving spouses and children who claim benefits based on a deceased worker’s record.
  • Family members of workers who become disabled.

Most workers and spouses become eligible to get Social Security benefits when they turn 62, regardless of whether they’re still working. Spouses have the added requirement of having to wait until the primary worker files for retirement benefits before they can claim spousal benefits, but they can also claim before turning 62 if they are caring for a child under age 16 or who’s disabled.

Surviving spouses can typically claim benefits at age 60, but again, those caring for young children under 16 can claim earlier. Surviving spouses who are disabled can claim even earlier, at age 50.

Disability benefits under Social Security work differently from retirement-related benefits, largely because the definition of disability largely precludes the disabled person from working and receiving Social Security. However, the earnings test under Social Security applies to retirement benefits, and so impacts on disability benefits differ from what you’ll see below.

Why’s it smart to keep working and claim Social Security?
There are several good reasons why you might want to start getting Social Security benefits even when you’re still working. They include the following:

  • The extra money you receive from Social Security might allow you to accumulate enough savings to retire a bit earlier than you otherwise would.
  • If you intend to work throughout your lifetime, then once you hit age 70, there’s no advantage to delaying taking your retirement benefits under Social Security.
  • Even those who retire from their primary occupations sometimes enjoy part-time work for supplemental income and opportunities to stay active.
  • You’re in poor health and believe that claiming while you’re still working is the only way you’ll likely receive any Social Security benefits at all.

When can I stop worrying about losing Social Security benefits if I’m working?
The key to understanding Social Security’s rules about working and benefits is that everything changes when you reach your full retirement age. After that point, you can earn as much as you want and still keep all your benefits. Earlier, though, you can give up some of your benefits.

For those seeking retirement or spousal benefits, the appropriate full retirement age is in the table below.

If you’re collecting survivor benefits, use this table instead.

Can I lose benefits if I work and take Social Security early?
Those who receive Social Security benefits and are still younger than their full retirement age sometimes have to have their benefits reduced. As you’ll see below, the amount of that reduction varies according to your age and your income.

Specifically, one set of limitations applies to those who are younger than full retirement age throughout the year, while another set applies if you reach full retirement age at some point during the year. Special rules also apply if you start receiving benefits in the middle of a year.

What’s the limit on earnings if I’m younger than full retirement age throughout 2020?
The Social Security earnings limits are established each year by the SSA. For 2020, those who are younger than full retirement age throughout the year can earn up to $18,240 per year without losing any of their benefits. After that, you’ll lose $1 of annual benefits for every $2 you make above the threshold.

So if you earned $19,040, then you’d lose $400 in benefits because you’re $800 over the limit. If you only start taking benefits midway through 2020, then the monthly limit is $1,520 and applies to the period during which you got Social Security checks.

What’s the earnings limit if I hit full retirement age during 2020?
Those who reach full retirement age during the year have higher limits and lose less of their benefits. For 2020, you’ll lose $1 in annual benefits for every $3 you earn above the annual limit of $48,600.

Earnings after the date when you reach full retirement age don’t count toward the total. In addition, you also don’t have to prorate the $48,600 amount. So if you hit full retirement age halfway through 2020, you could earn $48,600 in the first six months and still keep all of your Social Security.

What if I stop working in the middle of 2020?
A special rule deals with cases in which a person works part of the year but then retires. You’ll still apply the relevant rule for the earnings test to see if you’d ordinarily have to give up any of your Social Security. However, regardless of your total earnings, you’re still entitled to get Social Security checks for any month in which you’ve officially retired.

As an example, say you’re 63 and decide that you’re going to quit your $200,000 a year job at the end of June. You’d forfeit all of your benefits for the first six months of the year because of your high earnings, but starting in July, you could still get checks for the remaining six months even though your total annual earnings were well above the annual limit.

What happens to my forfeited Social Security benefits?
The SSA calculates the appropriate amount that you’ll forfeit and then takes them out of your monthly benefits. You’ll see entire monthly checks held back by the government to cover the forfeiture. For example, if you normally get Social Security of $1,000 a month but you have to forfeit $4,000, then the SSA will hold back four months’ worth of checks.

As painful as it is to lose your benefits, there is some payback. If you lose a month’s worth of benefits, then the SSA treats you as if you’d decided to retire a month later than you did. Once you hit full retirement age, you’ll start getting larger monthly checks based on that later retirement date. You might not get all your lost money back, but the bigger checks will gradually send some of it your way.

Will I lose my Social Security disability benefits if I work?
Rules for giving up disability benefits are completely different because of the nature of being disabled. The SSA requires that you no longer be able to work in gainful employment in order to collect Social Security disability. For 2020, that means earning no more $1,260 per month unless you’re blind, in which case a higher $2,110 monthly limit applies.

Unlike the retirement benefit rules, there’s no phase-out for losing disability benefits. Earn a single $1 above the limit, and you lose every penny of what you get from Social Security disability. Keep in mind that the substantial gainful activity rules are an all-or-nothing test, with no phased-out reduction based on earnings above the threshold. If you make less than the amounts above, then you keep full benefits, and if you make more, then you lose all of your disability benefits.

Only the disabled worker needs to worry about these rules. Spouses or children who get benefits based on a disabled worker’s record have to follow the ordinary work rules.

Should I change my Social Security strategy if I’m still working?
There are several ways you can avoid losing any of your Social Security benefits to the forfeiture rules. The simplest is just to wait until full retirement age before claiming your benefits. That way, you’ll be able to earn an unlimited amount without losing a penny of your Social Security.

If waiting that long isn’t an option, there are still some things you can do. For many, claiming at the beginning of the year in which you’ll reach full retirement age works out fine, because the higher earnings limits make it less likely that you’ll give up your Social Security.

Finally, if you’re expecting to work just on a part-time basis, it’s smart to look at the earnings limits and how they compare with your pay. If it looks like you might trigger the provisions, then you might decide to work a little less to keep all your benefits.

Take Social Security your way
How working will affect your Social Security benefits shouldn’t be the only thing you think about when deciding how you want to spend your older years. For many, continuing to work while taking Social Security has real advantages that make it worth having to navigate these rules.

— Dan Caplinger

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