Working While Collecting Social Security Benefits
If I claim SS at 62 and decide I want to work will SS lower my monthly benefit? Will I get that money back? Am I losing that money?
I get this question often and there seems to be some confusion.
The short answer is yes you will get that money back and no you aren’t losing that money.
Here’s how it works:
If you claim Social Security before your designated full retirement age and you are working, Social Security will withhold a portion of your monthly benefit if you exceed the annual earnings limit.
In 2024 the cap is $22,320, and you temporarily forfeit $1 in benefits for every $2 in earnings above the cap.
Notice I said temporarily forfeit. You don't lose that money. Your monthly benefit is temporarily reduced by $1 for every $2 in earnings above the cap of $22,320.
The earnings limit only applies if you are under full retirement age aka FRA which, for most retirees, is in the neighborhood of age 67. Once you reach FRA you can make as much money as you want. Social Security does not withhold any money from your benefits if you keep working after full retirement age aka FRA.
Here's the important thing to remember. When you reach FRA (full retirement age), Social Security will begin making up for the withholding by giving you credit for the months when your benefits were temporarily reduced.
Also note that you won’t see the boost from that benefit reset immediately after your FRA (full retirement age) date. Social Security will start the higher monthly payment the following January.
The extra years you worked could further boost your benefit payment if they rank among your 35 highest-earning years. And this could actually increase your benefit once you hit FRA (full retirement age).
Key takeaway:
What I want you to take from this is that if you start Social Security at age 62 and you still want to work then you should work. And don’t be afraid to make as much money from your job as you can even if it temporarily lowers your monthly Social Security Benefit. You’re not losing that money. Your monthly benefit is just being reallocated to a later time when you’ll need it.
Also remember the $22,320 earnings cap only applies to earned income. If you have a monthly pension or are taking distributions from an IRA or other retirement account that is not earned income and does not count towards the earnings cap.
You need a plan
Retiring - without a plan - is simply a plan to run out of money. Your NRECA R&S Pension is not a plan. Your NRECA 401k is not a plan. Social Security is not a plan. Those are only pieces in the retirement planning puzzle.
At 80/20 Financial Services we specialize in helping cooperative employees plan their retirement. We can show you how to turn your 401k and your R&S lump sum into a stream of income just like when you were working while also helping you achieve your desired financial outcomes in retirement.
The consultation is free and without obligation. Contact us to set up a consultation.
For more articles about retirement planning and investing click here.
Brian Coleman/Electric Cooperative Retirement Specialist
80/20 Financial Services is an Independent Registered Investment Advisory Firm. We help Electric Cooperative Employees create their retirement income and investment plans. We turn your NRECA 401k and R&S Pension into a plan that will provide you lifetime income and can change your family's legacy.
