Working After Age 62 Can Affect Social Security Payouts
Dear Planning to Retire,
I make about $45,000 per year. Should I start drawing Social Security even if I have to give half of it back? I just turned 63. I still am working and will probably work for another two years.
If you collect Social Security and earn a certain amount of money by continuing to work, some and possibly all of your benefits can be withheld. But you don't lose those benefits forever. At your full retirement age—for you it's age 66—your benefits will be recalculated to a higher amount. But, in your case, because you are earning well above the earning test limit, the amount is the same as what you would have earned simply by delaying claiming, according to calculations by Hugo Benitez-Silva, an associate professor of economics at the State University of New York at Stony Brook.
I asked Hugo Benitez-Silva to help address your Social Security options with some scenarios.
Delay claiming. Benitez-Silva calculated that if you stop working and begin claiming at age 63 and 2 months (assuming you were born June 1, 1945, and claim in July 2008), you will receive $1,003 a month. Continuing to work and waiting until age 66 to collect would net you $1,237 monthly and grow by 8 percent for each year you delay claiming after that up until age 70.
Claim and keep working indefinitely. If you sign up for Social Security and keep earning $45,000 a year, 50 cents of every dollar over $13,560 will be withheld from your check. So, you will effectively not receive any benefits until nearly age 66 unless you stop working or earn less money. The year you reach your full retirement age, a new formula kicks in. From January of that year until your birthday, you can earn up to $36,120 without penalty, above which your Social Security check is reduced by about 33 cents for every dollar earned. And once your birthday passes that year, the earnings limits no longer apply and you will receive $1,237, Benitez-Silva calculated. But that amount won't increase for continuing to work after age 66.
Retire at 65. If you claim now at the $1,003 rate, and retire at age 65, you will receive $1,003 from 65 to 66 and then $1,154 from age 66 on, Benitez-Silva calculated. (The same as if you had originally claimed at 65, except for that lower benefit the first year.) You can check out some other examples here.
"If someone plans to work well above the earnings test limit until after the early retirement age it seems that little is gained from claiming early, and the person might be equally well off by waiting until the age at which she stops working," explains Benitez-Silva. "Of course, that only works if someone thinks they are going to live long, are patient, and have other good sources of income during retirement."
Working also carries other benefits like being able to tuck more money into your IRA or 401(k), keeps you active and engaged, and lets you pay living expenses without dipping into savings until you can claim the higher amounts.
Here's an article about the ways work affects Social Security benefits.
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Reader Comments
Social Security and Railroad Retirement Benefits
Paid into secial security many years before starting with the railroad. Why can't I draw full social security bebefits and railroad pension both??
Railroad Retirement Benefits:Can I get some?
I married my Husband in 1942. He began working for Reading Railroad in 1949. We were divorced in 1972, and died of a heart attack two years later. He was on disability at that time. I was single, and did not remarry until 1976. I have never drawn on my own Social security, but on my second husbands, who has been deceased for 14 years. I will be 84 years old on June 23, this year. I have been told by a friend of mine, whose husband also worked on the Reading railroad, that I am eligible to receive my late first husband's railroad retirement benefits. I have his papers -- because when he died, I paid for his funeral all burial expenses. I was even stuck with paying his back deliquent taxes of two years and the reminder of his medical bills.nHe was r5 when he retired -- had no insurance plan. Thank You-. Having birthdays in the NOTCH period --my social security benefits are less than others. I worked until the age of 70, until the store closed. Sincerely, Minerva Gilara Walker. My first husband's name was Stanley Michael Gilara. He worked for the Reading Railroad out of the Rutherford Yards, near Harrisburg, Pennsylvania. Thanking you for your time and effort in answering. Sincerely
Railroad Retirement Benefits:Why can't I receive my late husbands railraod retirement benefits?
I married Stanley Michael Gilara in 1942. He began working for the Reading Railroad, at the Rutherford Yards, near Harrisburg in 1948. He had a stroke, went on disability , and died two years later, in 1974, at the age of 55, of a heart attack. I was divorced from him in 1972. Nevertheless, I took care of the funeral arrangements, paying the expenses for the services and burial. Afterward, I paid the balance of his medical bills and two years of back taxes, he still owed. In 1976 I remarried, that man passesd away 14 years later. I have never drawn on my own social security earnings, but have them from my second husband's social security. I have worked until the age of 79, and quit because the Office Max store was closed down. These Social Security benefits are smaller than some, as it is affected by the NOTCH. My question is whether or not I am entitled to receive my husband' s Stanley Gilara's) railroad pension? A friend of mine, whose husband also worked on the rairoad with mine -- told me I am entitled to receive them., since all our married life he was an employee of the Reading Company. Thank you for taking the time to read this and to return your answer. Sincerely, Minerva Gilara Walker (my legal name).
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