Working later in life, has almost become the norm. People love their jobs, have good health, look forward to additional income and savings, and sometimes just need to stay busy. With that said, whatever your situation might be, taking the Social Security benefit while still working can create quite a challenge.
The Earnings Test is quite complicated if there is not a thorough understanding of the rules and regulations. Prior to your Full Retirement Age, if you draw your Social Security benefit and continue working, you will be limited to $16,920 (2017 limit) earnings before penalties will be applied against your benefit amount. For every $2 you earn over the $16,920 limit, $1 of benefits will be withheld. In the year, you reach full retirement age, a more generous earnings test applies. In this scenario, you will lose $1 in benefits for every $3 earned over the $44,880 earnings limitations cap (2017). After full retirement age, the earnings test disappears.
If married, this poses many questions and requires a review of your situation. What are your age differences? Who is going to file and who is going to continue working? Are you both going to file and both continue working? Who has the excess earnings and whose benefit are the Social Security benefits calculated on if using a spousal benefit? Will this additional income put you in another tax bracket?
Another caveat to this rule, is if a couple decides to draw their benefits early, and one of the couple is drawing a spousal benefit, if the remaining person is still working and earning over the Earnings Limitation therefore reducing their benefit, the other parties benefit will be reduced in unison. Is this a mouthful – you bet!! The earnings test clock restarts each year that the person continues to work while under full retirement age and collecting benefits.
As we have stated over and over, there are 2,728 rules and regulations. And your decision to file is basically a permanent decision. Get it right the first time!! We have had many clients that have filed early, continued working, did not know how to structure what they were filing for, and ended up receiving NO Social Security income because of their earnings, locked in their benefit amount and reduced their Survivor Benefit all in one fell swoop.
Call Pillars LLC at 601-954-0699 (DIAL before you FILE) and Roy and Diane will help you with these decisions and show you how to maximize your benefit and accomplish your personal goals. They are both National Social Security Advisors and Roy is a former CPA of 40+ years. We are in Corinth but service clients in all 50 states.