Gone are the days when retirement meant putting your work life completely behind you. Today, mixing work with Social Security benefits has become a popular strategy for many seeking to enhance their financial stability during their golden years. However, the Social Security Administration (SSA) sets specific earnings limits that, if exceeded, can impact the amount you receive in benefits, all depending on how close you are to reaching your Full Retirement Age (FRA).
Navigating the Earnings Limits
Depending on your birth year, the FRA varies between 65 and 67. For instance, if you were born in 1960 or later, your FRA is 67.
If you haven't reached your FRA yet, the SSA imposes an earnings limit, which for 2024 stands at $22,320. Should your income surpass this threshold, your Social Security benefits will be reduced by $1 for every $2 you earn above the limit.
However, this changes in the year you reach your FRA. Up until the month you hit that age, a more generous earnings cap of $59,520 applies, with the SSA deducting $1 for every $3 earned over this higher limit. The good news? Once you hit your FRA, there's no limit on your earnings, and your benefits won't be reduced, no matter how much you make.
Consider a practical scenario: if you're under your FRA for the entire year and your benefits are set at $1,000 monthly, but you earn $15,000 more than the allowed limit, your benefits would be reduced by half of the excess, amounting to $7,500 over the year. Conversely, if you reach your FRA during the year, you can earn up to the month of reaching FRA without facing the same level of reduction. Once you hit FRA, your benefits aren't reduced, regardless of how much you earn.
What Counts as Earnings?
When it comes to what the SSA considers as "earnings," the focus is primarily on wages from employment or net profits from self-employment. This includes bonuses, commissions and vacation pay but excludes pensions, annuities, investment income, interest and benefits from other government or military retirement plans.
Earnings Limits for SSI and Disability Benefits
In 2024, the landscape for Supplemental Security Income (SSI) and Disability Benefits under Social Security has been updated.
For Supplemental Security Income (SSI), individuals and couples will see increased maximum federal payments, with updated monthly income limits that allow beneficiaries to earn more before affecting their SSI benefits. Specifically, individual income limits from wages rise to $1,971, while for couples, it's $2,915. Non-wage income limits also adjust to $963 for individuals and $1,435 for couples.
For Disability Benefits, the Substantial Gainful Activity (SGA) thresholds, which dictate the maximum earnings without affecting disability status, are set at $1,550 per month for non-blind individuals and $2,590 for blind individuals. The Trial Work Period (TWP) limit, allowing beneficiaries to test their ability to work for up to nine months without losing benefits, is set at $1,110 per month.
The Wisdom of Delaying Benefits
Given the intricacies of Social Security benefits, strategic planning can significantly benefit retirees. For those born in 1955, the FRA is 66 years and two months, gradually rising to 67 for those born in 1960 and afterward. Starting benefits at age 62, the earliest eligibility age, results in a permanent reduction of benefits by about 30% compared to waiting until your FRA. Yet, if you can delay receiving Social Security benefits until age 70, you'll lock in the maximum monthly benefit possible. If you are 70 plus, there's no financial advantage in delaying benefits.
Last Word
The SSA's earnings limits and the associated reductions in benefits underscore the importance of planning when to start taking Social Security benefits, especially if you intend to continue working. Reporting your earnings accurately and understanding how earnings affect benefits— particularly in relation to your FRA—can prevent unexpected reductions in your benefits.
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How Much Can You Earn While Drawing Social Security Benefits?
Gone are the days when retirement meant putting your work life completely behind you. Today, mixing work with Social Security benefits has become a popular strategy for many seeking to enhance their financial stability during their golden years. However, the Social Security Administration (SSA) sets specific earnings limits that, if exceeded, can impact the amount you receive in benefits, all depending on how close you are to reaching your Full Retirement Age (FRA).
Navigating the Earnings Limits
Depending on your birth year, the FRA varies between 65 and 67. For instance, if you were born in 1960 or later, your FRA is 67.
If you haven't reached your FRA yet, the SSA imposes an earnings limit, which for 2024 stands at $22,320. Should your income surpass this threshold, your Social Security benefits will be reduced by $1 for every $2 you earn above the limit.
However, this changes in the year you reach your FRA. Up until the month you hit that age, a more generous earnings cap of $59,520 applies, with the SSA deducting $1 for every $3 earned over this higher limit. The good news? Once you hit your FRA, there's no limit on your earnings, and your benefits won't be reduced, no matter how much you make.
Consider a practical scenario: if you're under your FRA for the entire year and your benefits are set at $1,000 monthly, but you earn $15,000 more than the allowed limit, your benefits would be reduced by half of the excess, amounting to $7,500 over the year. Conversely, if you reach your FRA during the year, you can earn up to the month of reaching FRA without facing the same level of reduction. Once you hit FRA, your benefits aren't reduced, regardless of how much you earn.
What Counts as Earnings?
When it comes to what the SSA considers as "earnings," the focus is primarily on wages from employment or net profits from self-employment. This includes bonuses, commissions and vacation pay but excludes pensions, annuities, investment income, interest and benefits from other government or military retirement plans.
Earnings Limits for SSI and Disability Benefits
In 2024, the landscape for Supplemental Security Income (SSI) and Disability Benefits under Social Security has been updated.
For Supplemental Security Income (SSI), individuals and couples will see increased maximum federal payments, with updated monthly income limits that allow beneficiaries to earn more before affecting their SSI benefits. Specifically, individual income limits from wages rise to $1,971, while for couples, it's $2,915. Non-wage income limits also adjust to $963 for individuals and $1,435 for couples.
For Disability Benefits, the Substantial Gainful Activity (SGA) thresholds, which dictate the maximum earnings without affecting disability status, are set at $1,550 per month for non-blind individuals and $2,590 for blind individuals. The Trial Work Period (TWP) limit, allowing beneficiaries to test their ability to work for up to nine months without losing benefits, is set at $1,110 per month.
The Wisdom of Delaying Benefits
Given the intricacies of Social Security benefits, strategic planning can significantly benefit retirees. For those born in 1955, the FRA is 66 years and two months, gradually rising to 67 for those born in 1960 and afterward. Starting benefits at age 62, the earliest eligibility age, results in a permanent reduction of benefits by about 30% compared to waiting until your FRA. Yet, if you can delay receiving Social Security benefits until age 70, you'll lock in the maximum monthly benefit possible. If you are 70 plus, there's no financial advantage in delaying benefits.
Last Word
The SSA's earnings limits and the associated reductions in benefits underscore the importance of planning when to start taking Social Security benefits, especially if you intend to continue working. Reporting your earnings accurately and understanding how earnings affect benefits— particularly in relation to your FRA—can prevent unexpected reductions in your benefits.