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Kevin O'Flaherty

In this article, we discuss how working can affect your Social Security benefits and answer the following questions:


  • Can I work after "retirement?"
  • What are Social Security credits?
  • At what age is someone considered fully retired under Social Security?
  • What are the limits on Social Security in 2021?
  • Does Social Security track my monthly earnings?
  • What if I work outside the United States?


More and more individuals are working into their sixties and seventies. For some, they simply enjoy the work. But for many others, working into their late sixties and early seventies is necessary to make up for the limited funds that Social Security provides. You can continue to work and receive Social Security benefits, but those benefits may be reduced depending on your age.


Can I Work After "Retirement?"


For many generations, the ideal retirement age was fifty-five. You could travel, spend time with friends and grandchildren, and ease into your twilight years. Ask a millennial or younger generation if they plan to retire at fifty-five, and most will laugh at you. While many still strive to retire "young," those not earning large incomes understand that retiring too soon may strain their financial situation as they age into their eighties and nineties. Thankfully, we can continue to work and receive Social Security benefits, but those benefits are reduced before age seventy.


What Are Social Security Credits?


Social Security credits are a simplified representation of how much Social Security you've accumulated over the years. You need forty credits to be eligible to receive Social Security benefits; for most people, this equals out to around 10 to 12 years of work.


In 2021, one credit equals $1,470 of earnings with a maximum of four credits per year. So long as you earn $5,800 or more next year, you will have maxed out your Social Security credits for the year. The credit to earnings equivalency increases each year as average earnings increase. Those who generate more income, and thus pay more into Social Security, will have higher future benefits, up to a certain limit.


What Age Is Someone Considered Fully Retired Under Social Security?


Full retirement age for Social Security is between 65 and 67 years old. The two-year range accounts for what year the individual was born. A person born on the first day of a given year versus the last day of the same year should naturally expect to be eligible for full retirement at different times. If your full retirement age is 67, you can start taking benefits at 62 years old, but those benefits will be reduced compared to what you would receive at 67. If you're still working, your benefits might be reduced further. At age 70, you are entitled to the full amount of benefits regardless of your employment situation.


What Are The Limits On Social Security In 2021?


Depending on your age, continuing to work while collecting Social Security benefits can affect your monthly benefit allowance. You can start collecting Social Security as early as 62, but there is a limit placed on your income before deductions kick in. Specifically, in 2021, if you earn over $18,960 and you're not fully retired, Social Security will deduct one dollar from your benefit total for every two dollars earned. During the year you reach full retirement age, the deduction eases to one dollar for every three dollars earned. Once you reach full retirement age, you can earn any amount of money without affecting your Social Security benefits. The good news is that the money deducted before you reached full retirement age doesn't simply disappear. Social Security will recalculate your benefits and increase them accordingly.


Does Social Security Track My Monthly Earnings?


How does the Social Security Administration track the millions of Americans as they transition into the varying degrees of retirement? The answer is that it doesn't. Just like your yearly taxes, the SSA expects you to track and report your earnings. After all, it is your money. But don't think this means you can game the system and start collecting your full benefits early, especially if you're working. When you file your taxes, the SSA will review your earnings versus how much you collected in S.S. benefits. If the numbers don't match up, you may be fined, hit with higher taxes, forced to pay back the excess, and receive a lower benefit in the future.


What If I Work Outside The United States?


Working outside the U.S. in a position not subject to Social Security taxes while collecting Social Security benefits can still reduce benefits. However, the specifics become complicated, and the reduction in benefits is based on hours worked and age until full retirement. If you plan to work outside the U.S. and collect S.S. benefits, you should reach out to an estate planning or tax attorney. An accountant can also help you avoid unnecessary fines and taxes.

Disclaimer: The information provided on this blog is intended for general informational purposes only and should not be construed as legal advice on any subject matter. This information is not intended to create, and receipt or viewing does not constitute an attorney-client relationship. Each individual's legal needs are unique, and these materials may not be applicable to your legal situation. Always seek the advice of a competent attorney with any questions you may have regarding a legal issue. Do not disregard professional legal advice or delay in seeking it because of something you have read on this blog.


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