Thinking about working in retirement? That could be a smart move. Supplemental income from a part-time or seasonal job could help you fund your expenses and support your desired lifestyle. A job could also help you fill your free time and maintain social connections. You may even be able to work in a field you love.
Working in retirement can also create some planning challenges, though. You may want to consider how the job will impact your schedule and your ability to enjoy retirement. As you get older, you may also consider how work affects your health.
There’s also the issue of Social Security. Nearly 90 percent of American retirees rely on Social Security for income. If you’re like most, Social Security will play an important role in your financial picture.
Does work impact your Social Security benefit? It depends on a number of factors, including your earnings and your age. Below are a few important guidelines to keep in mind as you plan your retirement strategy:
Before Your Full Retirement Age (FRA)
You’re eligible to file for Social Security as early as age 62. However, you could see a significant cut in your benefits if you apply at that time. To get your full benefit, you need to wait until your full retirement age (FRA) to file. Most people reach their FRA between age 66 and 67. Despite the benefit reduction, almost half of all Social Security recipients choose to file for benefits at age 62.
If you file before your FRA and continue working, you may see even more of a reduction. You can earn up to $17,040 per year and receive benefits before your FRA without a reduction. After you cross that threshold, though, your benefit is reduced by $1 for every $2 you earn. If you plan on continuing to work, think carefully about whether it makes sense to file for Social Security.3
The Year of Your FRA
Most people have an FRA at some point between their 66th and 67th birthdays. The actual month of your FRA depends on your date of birth. You don’t technically reach your FRA until that month arrives.
However, Social Security adjusts the benefit reduction for work when you reach the year of your FRA. In that year, even if you haven’t reached the specific FRA month, you can earn as much as $45,360 without seeing a reduction. Keep in mind that those are your maximum earnings up to the month in which you reach your FRA. After you cross the threshold, your benefit is reduced by $1 for every $3 you earn.
After Your FRA
In the month you reach your FRA, you can start working with no benefit reduction and no earnings limit. You can earn as much as you want and still receive your full Social Security benefit. At this time, Social Security also recalculates your benefit amount and excludes any months in which your benefit was previously reduced because of earnings penalties.
Ready to plan your Social Security strategy? Let’s talk about it. Contact us today at Northern Plains Insurance and Financial. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
The material is not intended to be legal or tax advice. The insurance agent can provide information, but not advice related to social security benefits. Clients should seek guidance from the Social Security Administration regarding their particular situation. The insurance agent may be able to identify potential retirement income gaps and may introduce insurance products, such as an annuity, as a potential solution. Social Security benefit payout rates can and will change at the sole discretion of the Social Security Administration. For more information, please consult a local Social Security Administration office, or visit www.ssa.gov
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