When you file for Social Security benefits, you've made a choice that will affect how much income you receive for the rest of your life. If you filed for benefits before your full retirement age (FRA) -- which is determined by your birth year -- you may have permanently shrunk your monthly benefit.
There's one situation where your benefits may stop after you start them, though -- and this could actually be a good thing. It could happen if you're working while getting benefits and you haven't hit your FRA yet. Here's how this could happen, and how it could benefit you.
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Why earning too much money could stop your Social Security benefits
Once you have reached your full retirement age, you are allowed to work as much as you want while also double dipping and getting your Social Security retirement benefits at the same time. But the rules are different if you're not yet at your FRA.
If you are working, getting benefits, and will not reach your retirement age at any point during the course of the year, you are allowed to earn up to $21,240 in 2023 without any impact on your Social Security checks. But if you earn more than that, you forfeit $1 in benefits for every $2 extra you earn.
If you will reach your FRA at some point during the year you're working while getting benefits but you haven't yet hit that milestone, you're allowed to earn up to $56,520 without benefits being impacted. After that point, you lose $1 in benefits for every extra $3 you make.
With these rules in place, if you earn enough money, you could end up stopping your checks entirely. And while this may sound like a bad thing, it could actually end up being great for you in the long run.
Why stopping your benefits could help you
Working enough to forfeit your Social Security checks can allow you to increase the amount of your benefits later on. That's because when you forfeit checks, your benefits end up being recalculated at your full retirement age to account for that -- and your monthly Social Security payment climbs higher as a result.
See, when you've claimed benefits before full retirement age, you are hit with early filing penalties for every month you get a payment before reaching that FRA. But if you've forfeited checks because of excess earnings, you get credited back that early filing penalty for all of those months that no Social Security payment came.
If you claimed Social Security because you lost your job or had a health issue and then were able to resume work again, the ability to stop your checks by earning a sufficient income can be a great thing since it means those early filing penalties you'd have otherwise faced will disappear. When you eventually hit your full retirement age, the extra money you get in your checks because of it could really come in handy.
Of course, the downside is that if you were hoping to get both Social Security income and income from your job, that may not be possible. So be sure to take that into account when making your plans for how you'll support yourself as a retiree.
