David Nadelle
·3 min read
Working while you are retired can not only boost your income, but it’s also a good way to fill your days.
See: 7 Frugal Habits That Rarely Pay Off for Boomers in Retirement
Learn: 3 Ways To Recession-Proof Your Retirement
And having a job, even a part-time one, often helps with the transition from worker to retiree.
However, there is a limit to what older workers can make and still receive full Social Security benefits.
At What Age Are You Retiring?
According to the Social Security Administration, you are considered retired once you begin receiving Social Security retirement benefits.
Upon reaching full retirement age — 67 depending on if you were born before or after 1960 — you don’t have to worry about work earnings affecting your benefits. That’s one of the bonuses of waiting: You can earn as much as you want without the penalty of having your Social Security income withheld.
If you’re under the full retirement age, however, the annual earnings limit is $21,240 for 2023. If you earn more than this, the SSA will deduct $1 for every $2 you have earned above the limit.
In the year that you reach the age of full retirement, the deduction will be $1 for every $3 you earn above the limit. In 2023, the limit stands at $56,520.The earnings calculation is made up to the month before the month you reach retirement age, not your total yearly earnings.
More: 14 Key Signs You May Run Out of Money in Retirement
So How Much Can You Earn?
The SSA gives examples to illustrate both scenarios.
Say you are younger than the full retirement age for a full year and are due to receive $800 a month, or $9,600 per year, in benefits. If you work and earn $31,240, which is $10,000 over the $21,240 limit, your Social Security benefits would be reduced by $5,000 — $1 for every $2 over the limit. So, you would receive $4,600 of your $9,600 in benefits for the year.
Using the same hypothetical benefit amount, say you reach full retirement age in August, and you make $63,000 during the year, with $57,000 of it in the seven months from January through July. That would be $480 over the $56,520 limit.Social Security payments would be reduced by $160 in January through July — $1 for every $3 you earned above the limit.
Come August, when you reach full retirement age, you would receive your full benefit regardless of what you earn.
When the SSA calculates how much to deduct from your benefits, it counts the wages you make from your job or, if you are self-employed, your net profit, including bonuses, commissions and vacation pay. It doesn’t count pensions, annuities, investment income, interest, veterans’ benefits or other government or military retirement benefits, according to the SSA’s “How Work Affects Your Benefits” publication.
It should be noted that the benefits you lose when you are under full retirement age are not lost completely. You’ll receive previously withheld benefits after you reach your full retirement age.However, drawing Social Security benefits early means lower benefits later in life.
Cynthia Measom contributed to the reporting for this article.
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This article originally appeared on GOBankingRates.com: Social Security 2023: How Much Can You Earn and Still Collect Payments?
