How Does Work in Retirement Impact Your Social Security?

At first glance, you may not think that work and retirement mix. After all, retirement is all about leaving the working world. How can you enjoy your newfound freedom and lifestyle if you’re still working?
 
Working doesn’t have to mean giving up your freedom, though. You could work part time or seasonally. You could work as a coach, consultant or trainer and manage your own schedule. You could even freelance or drive for a ride-sharing company.
 
No matter which route you take, there are serious benefits to working in retirement. Obviously you get supplemental income, which could help you maintain your retirement assets and enjoy greater financial stability. Work could also provide socialization opportunities and help you meet new friends.
 
There are also a few considerations that you shouldn’t ignore. Are you healthy enough to work in retirement? What kind of schedule would allow you to still enjoy your retirement? And perhaps most important, how will the extra income affect your Social Security benefits?
 
Social Security is an important resource for retirees. In fact, nearly 90 percent of all Americans age 65 and older rely on Social Security for income.1 If you’re like most, Social Security will play an important role in your financial picture.

Does work impact your Social Security benefits? It depends on a number of factors, including your earnings and your age. Below are a few important guidelines to keep in mind as you plan your retirement strategy:

Before Full Retirement Age (FRA)
 
The earliest you can file for Social Security is age 62. You can file at this age even if you are still working. Regardless of whether you’re working, however, filing before your FRA could lead to a big reduction in your benefits, perhaps as much as 35 percent.2 Despite the potential reduction, many people choose to file for benefits as soon as they’re eligible.
 
The benefit reduction could be compounded if you file early and choose to work. Before your FRA, you can earn up to $17,040 in a year without seeing a reduction in your benefits. After you cross that threshold, however, your benefit is reduced by $1 for every $2 you earn. If you plan on continuing to work, think carefully about whether it makes sense to file for Social Security.3

Year of Your FRA
 
Most people’s FRA lands at some point between their 66th and 67th birthdays. The actual month depends on your date of birth. You don’t technically reach your FRA until that month arrives.4
 
Once you reach the year of your FRA, Social Security makes an adjustment to the work reduction. In that year, you can earn as much as $45,360 without seeing a reduction. Keep in mind that those are your maximum earnings up to the month in which you reach your FRA. After you cross the threshold, your benefit is reduced by $1 for every $3 you earn.

 After Your FRA 
 
In the month you reach your FRA, you can start working with no benefit reduction and no earnings limit. You can earn as much as you want and still receive your full Social Security benefit. At this time, Social Security also recalculates your benefit amount and excludes any months in which your benefit was previously reduced because of earnings penalties.
 
Ready to plan your Social Security strategy? Let’s talk about it. Contact us today at Heritage Financial North. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
 

1https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf
2https://www.ssa.gov/planners/retire/agereduction.html
3https://www.ssa.gov/planners/retire/whileworking.html
4https://www.ssa.gov/planners/retire/1943.html
 
Advisory Services Offered Through Change Path LLC, a Registered Investment Advisor. Heritage Financial North and Change Path LLC are not affiliated.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
The material is not intended to be legal or tax advice. The insurance agent can provide information, but not advice related to social security benefits. Clients should seek guidance from the Social Security Administration regarding their particular situation. The insurance agent may be able to identify potential retirement income gaps and may introduce insurance products, such as an annuity, as a potential solution. Social Security benefit payout rates can and will change at the sole discretion of the Social Security Administration. For more information, please consult a local Social Security Administration office, or visit www.ssa.gov
17846 – 2018/7/30