Today most of the people work even after the retirement age because of their economic needs or to keep them going. Here however, the query, which usually crops in the mind of the senior citizen is: Do you receive Social Security even when still in employment? The answer is – yes with some terms and conditions attached to it which is quite important to know.
Relationship between Social Security and earnings: How does the “Earnings Test” work
In case you receive retirement benefits through the Social Security program and simultaneously earn a wage, then your monthly social security allowance will be reduced. It is referred to as Social Security Earnings Test in the US. It is used to reveal the amount of benefits you will receive and amount that will be withheld and released temporarily depending on your age and the total income earned within a given year.
The Earnings Test’s three categories: Which one do you fall into?
The Earnings Test determines how your income affects your Social Security benefits, and there are three categories:
- Your full retirement age will come after 2025.
- You will reach your full retirement age in 2025.
- You have already reached full retirement age.
In case you are within the third category, in other words, you have been past the full retirement age, Earning Test no longer applies to you. This implies that you are free to earn any amount you wish, which does not expose your Social Security to cutdown.
What are the Earnings Test limits in 2025?
If you will not reach your full retirement age in 2025:
- The yearly salary you can get is up to 23400 with none deductions.
- And should you earn more than that, one dollar out of every two dollars you earn will be provisionally withdrawn out of your Social Security benefit.
Example:
In case by 2025 you can earn $30,000, you will have surpassed the limit of $6,600. This implies that your benefit will temporarily be withheld to the tune of 3300 dollars.
If you will reach your Full Retirement Age in 2025:
- In this case, the Earnings Test applies only to your earnings in the months before your birth month.
- During this time, you can earn up to \$62,160 annually or \$5,180 per month without any deductions.
- For more than that, \$1 for every \$3 of additional earnings** will be withheld from benefits.
What does “withheld” mean — is the money lost?
What is significant here is that the money that goes beyond the Earnings Test limit and that some of the Social Security benefit reaches is not lost forever once it is “withheld”.
Once you attain full retirement age, the monthly amount of your Social security is again recalculated in such a way that you can receive your benefits regarding withheld payments once again.
Should you claim Social Security while working?
It is a highly personal choice and the only true answer has to do with circumstance. There is value to taking Social Security benefits now to some individuals, even though it is possible that part of its benefits are being held off temporarily.
Conversely, when you already have too much income and cannot use Social Security right now, it is perhaps more advisable to wait some time and receive a larger amount of money monthly in the future.
Some key factors that may influence your decision:
- Your current financial situation
- Health and life expectancy
- Family responsibilities
- Retirement plans and goals
Additional Information: The $23,760 Bonus Most Retirees Don’t Know About
A report by The Motley Fool shows that some Social Security options may provide you with an additional benefit of up to 23,760 dollars per year.
Little is known about these so called hidden benefits and this leads many American retirees to get nothing much out of their Social Security plan.
Thus when you are nearing your retirement, it is also advisable to familiarize these special rules and tips and make the best of it.
Conclusion: Work and Social Security benefits – finding a balance is key
You may be able to draw social security checks as you work but there are a number of rules you must observe. Earnings Test might affect your monthly payments temporarily, but with the knowledge of the system and with planned actions you can maximize your retirement benefit.
FAQs
Q1. Can I work while receiving Social Security benefits?
Yes, you can work and receive benefits, but your earnings may temporarily reduce your payments depending on your age and income.
Q2. What is the Social Security Earnings Test?
It’s a rule that withholds part of your benefits if you earn above a certain limit before reaching full retirement age.
Q3. What is the income limit for 2025 under the earnings test?
If you won’t reach full retirement age in 2025, you can earn up to $23,400 without any reduction in benefits.
Q4. Do I lose withheld Social Security benefits forever?
No, withheld benefits are not lost. They are recalculated and added back once you reach full retirement age.
Q5. Should I delay claiming Social Security if I’m still working?
It depends on your financial needs. If you don’t need the money immediately, delaying may result in higher monthly benefits later.
