Retirement Planning

How Working In Retirement Can Affect Your Social Security Benefits

There are some benefits to having life insurance as it relates to your child's college education, such as providing relief from student loan debt and allowing them to focus on their education.

How Working After You Retire Can Affect Your Social Security Benefits

The choice to work part-time while in retirement is often met with confusion regarding just how much income you can earn without putting your Social Security benefits in jeopardy. However, once you understand the rules, earning a part-time paycheck while in retirement can be a great way to supplement your income.

How it all works

According to the Social Security Administration (SSA), if you’re younger than full retirement age while receiving SSA retirement benefits, working for an employer, and are earning additional income that exceeds the yearly earnings limit (as set by the SSA), your benefits may be reduced.1 However, beginning with the first month you reach full retirement age, you’re allowed to earn as much as you want without a reduction of your benefits.

If you plan on working in retirement and are under your full retirement age for the entire year, the SSA will deduct $1 from your benefit payments for every $2 that you earn above the annual set limit. But, if you wait until the last year before reaching your full retirement age to work, the earning limit increases, and the Social Security Administration (SSA) will deduct $1 in benefits for every $3 you earn above the set limit.2 If you’re self-employed, the SSA will consider your gross wages before withholding taxes and net earnings from your income.

By working part-time, you may be giving yourself a future raise

That’s right. Because your Social Security benefit is based on your highest earning 35 years, those extra dollars you’re earning may actually give you a raise in your benefits. For example, if any of the years while working part-time in retirement are higher than any of the other 35 years, the SSA will replace the lowest earning years. But wait, it gets even better.

The nice thing about working in retirement is that the SAA does all the calculating for you. Each year, the SSA reviews your record for working while receiving your benefits to see if additional earnings will increase your monthly benefit. If an increase is in order, the SSA will recalculate your new benefit amount and pay the increase retroactive to January, following the year of your additional earnings.

For more information on retirement planning, visit the Protective Learning Center.

1. https://faq.ssa.gov/link/portal/34011/34019/Article/3739/What-happens-if-I-work-and-get-Social-Security-retirement-benefits
2. https://faq.ssa.gov/link/portal/34011/34019/Article/3739/What-happens-if-I-work-and-get-Social-Security-retirement-benefits


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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax‐related decisions. For information about Protective Life and its products and services, visit www.protective.com.

Retirement

There is confusion and sometimes concerns about working part-time while in retirement. Not knowing how much income you can earn without putting your Social Security benefits in jeopardy can be challenging. But once you understand the rules, earning a part-time paycheck while in retirement might be a great way to supplement your income, as well as offer you additional benefits when it comes time to retire. For more information, visit our learning center.

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