Source: FDR Presidential Library & Museum
You can choose to start collecting Social Security as early as age 62, but many people don't plan on retiring so soon. And, many retirees of all ages decide to work part-time jobs for a variety of reasons. Both of these scenarios pose the question "Can I work while taking Social Security?"
The short answer
Can you work while taking Social Security? Yes, but doing so may affect your benefits.
You can work at any time, regardless of age or whether or not you've filed for Social Security benefits. However, doing so can impact your current benefits if you haven't reached your full retirement age yet.
The Social Security earnings test
In order to determine the effect of working on your Social Security benefits, the Social Security Administration (SSA) applies the "earnings test." For the purposes of this test, there are three different categories.
- If you'll attain your full retirement age after 2016, the first $15,720 you earn this year will not affect your Social Security benefits. Any amount you earn in excess of this threshold will reduce your benefits by $1 for every $2 in earnings. For example, if you are 63 and earn $30,000 this year, only $14,280 will be considered, and your benefits will be reduced by one-half of this amount, or $7,140.
- If you'll attain your full retirement age during 2016, the first $41,880 you earn is exempt from the earnings test. Any earnings beyond this amount will reduce your benefits by $1 for every $3 in earnings, and the test only applies to earning before your birthday. So, if you'll turn 67 this November, and earn $50,000 before this time, $8,120 of this amount will count when determining your benefit reduction. Your Social Security benefit will be reduced by one-third of this amount, or $2,707.
- Finally, if you reached full retirement age before 2016, no earnings test will apply to you. You are free to work as much as you want, while still collecting your full Social Security benefit.
|
If you reach normal retirement age... |
This much of your earnings are exempt from the earnings test |
Above this amount, your 2016 benefit will be reduced by |
|---|---|---|
|
After 2016 |
$15,720 |
$1 for every $2 in earnings |
|
During 2016 |
$41,880 |
$1 for every $3 in earnings |
|
Before 2016 |
All of them |
N/A |
It's also important to note that if your benefit is reduced because you earned too much, it isn't really a "reduction." Rather, an earnings test reduction now will permanently boost your benefits later to account for the lost benefits that were withheld, just as if you had delayed Social Security in the first place.
Keep an eye on politics
Some of the current presidential candidates have suggested, and rightfully so, that the earnings test discourages people from working after retiring before their "full retirement age." As a result, there are several proposals to change this -- such as getting rid of the retirement earnings test entirely, or exempting workers over a certain age from paying Social Security taxes.
The point is that Social Security is a highly political issue, and as such, can and probably will change over the years. If you're not retired yet, the earnings test my look rather different, or might not exist at all. So, be sure to check back periodically and keep yourself up-to-date.
