Wednesday, January 26

All you need to know

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Editor’s Note: This story originally appeared on New retirement.

Social security and work: Believe it or not, the two are more or less completely compatible with each other.

You can absolutely get Social Security retirement benefits and work at the same time. However, here are some things to know.

Social Security work penalties are determined by your age

Senior working in an office.
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There are no penalties for receiving Social Security and working at the same time if you have reached full retirement age.

After reaching your full retirement age, you can earn as much money as you want without incurring penalties.

Your full retirement age is determined by your birthday. For example, if you were born between 1943 and 1954, then your full retirement age is 66. If you were born in 1960 or later, then your full retirement age is 67.

It is important to note that the rules described here are for Social Security retirement benefits. There are different rules for payments of disability income or supplemental security.

For more information, you can consult the Social Security Administration Retirement Benefit Planner Website.

What are the Social Security work penalties if I am under my full retirement age?

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If you decide to collect Social Security benefits and work at the same time when you are younger than your full retirement age, there will be penalties depending on your age.

What if you are more than a year below your full retirement age?

Older worker
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If you are under full retirement age for all of 2022 and still work, the Social Security Administration will deduct $ 1 from your Social Security benefit check for every $ 2 you earn over the annual limit.

By 2022, that limit is $ 19,560.

What happens the year you reach full retirement age?

Man working from home
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In the year you reach full retirement age and are still working, Social Security will only deduct $ 1 from your benefits for every $ 3 you earn over the $ 46,920 limit through the month you reach your FRA.

Labor penalties are likely to be recovered

Social Security Payment
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According to guidance from the Social Security Administration, “Your benefit will increase at your full retirement age to account for benefits withheld due to previous income.”

So you might think of penalties as another way to save for your future.

What counts as earned income?

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If you are below your full retirement age and working, you are probably concerned about what exactly counts as earned income.

The following sources of income count as income:

  • Wages from a job
  • Net earnings if you are self-employed
  • Bonuses, commissions and vacation pay

Income not counted includes pensions, annuities, investment income, veterans’ interest and benefits, or other government or military retirement benefits.

Social Security and work: you will always pay Social Security taxes

Seniors who work in taxes
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Regardless of your full retirement age and whether or not you are paying work penalties, if you are working, you will continue to pay Social Security taxes on your income.

The good news here is that that extra income could potentially increase the amount of your Social Security benefits.

The Social Security Administration will check your record each year and notify you if you have achieved a higher benefit amount.

When should you start receiving Social Security benefits?

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The general rule of thumb is that you should delay the start of Social Security benefits as long as possible, regardless of whether you intend to work or not.

This is because the earlier you start, the lower your monthly benefit check will be. You can use a Social Security Balance Calculator to determine the optimal time to start benefits.

Or find out the different amounts of your benefits for different starting ages and test various scenarios in a detailed retirement calculator.

NewRetirement’s retirement planning calculator will tell you exactly how your cash flow, net worth, age at saving depletion, and debt situation will be affected by different Social Security benefit amounts and starting ages, taking into account penalties. for any earned income received before full retirement. get older.

How long should I work?

Older worker
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Working has many benefits: staying engaged, social connection, mental stimulation, and, of course, income.

You must work as long as you need and as long as you want.

A retirement planning calculator can be a useful tool to help you assess how income from work affects your long-term retirement plan.

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