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Some Retirees Could Earn Almost $2,000 More Next Year Without Losing Social Security Benefits

By Christy Bieber – Oct 31, 2020 at 7:11AM

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Here's why some seniors could end up with extra cash.

If you're receiving Social Security benefits and are thinking about working, you could end up forfeiting some of those benefits -- at least temporarily -- if you take a job.

This doesn't happen to every retiree who works while collecting benefits. If you're above full retirement age (which is between 66 and 67), you can work as much as you want with no effect on your checks. But if you're under FRA and you earn too much, you could very well find yourself getting less money from Social Security, or even none at all. 

The good news is, if you're thinking about working next year, you can earn a little more in 2021 without your benefits being affected. In fact, some retirees could earn close to $2,000 more over the course of the year. Here's why. 

Older woman working stocking shelves.

Image source: Getty Images.

This Social Security change means you could earn more money next year

Retirees who work can earn more in 2020 without affecting their Social Security checks because the amount you can earn before you start to lose benefits is going up next year. 

In 2020, if you worked while earning benefits and wouldn't reach your full retirement age at any point during the year, the maximum you could earn before forfeiting some of your benefits was $18,240 (or $1,520 per month). In 2021, this limit is going up to $18,960 (or $1,580 per month). That's an extra $60 in monthly income. Once you reach this threshold, you lose $1 in benefits for every $2 in additional earnings. 

For those who will reach full retirement age at some point during the year, the maximum you could earn before starting to forfeit benefits was $48,600 ($4,050 per month), but this limit is going up in 2021 too. You'll be allowed to earn up to $50,520 (or $4,210 per month) before losing benefits. That's an extra $1,920 per year -- almost $2,000 more. After you hit this limit, you'll lose $1 in benefits for every $3 in additional earnings.    

Being able to work more while still receiving your full Social Security benefit is a major advantage for retirees, many of whom limit the amount they earn because they don't want to give up any of their Social Security income. Holding a job while collecting benefits can increase financial security and provide something to do in your later years -- especially if you enjoy your job. 

Of course, when you forfeit benefits by working and earning too much, you don't lose the money forever in most cases. When you hit your full retirement age, the amount of your monthly benefit is recalculated to take the missed income into account and your future checks are increased.

But it can take a long time for the small amount of extra money you get each month after this recalculation to make up for forfeited benefits. And getting more money years later doesn't help you if you want both your Social Security income and paychecks to live on now. 

Fortunately, since you can earn more in 2021 before your benefits are affected, some retirees may just find themselves with some extra cash in their pockets next year. 

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