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What are potential impacts of working during retirement?

I've heard that working part time while retired can affect how your social security is dispersed and the amount you get. I'm less interested in earning new income than I am interested in working part time, but i'd reconsider if it would significantly alter my social security payments.

Mar 22, 2012 by Louis from Harrisburg, PA in  |  Flag
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Hello Louis,

You are correct; you may lose some of your social security benefits if you have earned income - but that depends upon your age.

In 1996 Congress passed, and President Clinton signed, the Senior Citizen's Right To Work Act of 1996. This allows individuals who have reached their FRA (Full Retirement Age) to earn additional income as a result of employment - without losing social security benefits.

However, earning income ("earned" income - in this case means "by the sweat of your brow," not pension or investment income) PRIOR to reaching your FRA may decrease your Social Security benefits - IF you are already drawing retirement benefits.

So - in any year PRIOR to your Full Retirement Age (Age 66 and some months for most people currently drawing Social Security) - you can EARN up to $14,640 before losing any Social Security benefits. If you earn more, you will lose $1 for ever $2 you earn ABOVE $14,640.

IN THE YEAR of your FRA - you can EARN up to $38,880 and not lose any Social Security benefits. However, if you earn more, you will lost $1 for every $3 you earn ABOVE $38,880.

It is also interesting to note that if you earn income and do lose some Social Security dollars - the wages you earn still contribute to your "Social Security Account" and you may have increased benefits later.

The best thing to do is to make an appointment with the Social Security office and talk to one of the Social Security representatives there. Let them know your plans - and if you DO decide to work - let them know that too. They will adjust your Social Security payouts so there are not any unpleasant surprises next year and help you decide what it best for you.

Also, you may want to take some time and visit Social Security's website: www.SSA.gov. It is truly a VERY user friendly and robust website that is quite helpful. Contrary to one's general impression of the government - they did a great job on it.

Jon Castle


Comment   |  Flag   |  Mar 22, 2012 from Jacksonville, FL

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The previous is a link to a 10 page explanation from the Social Security Administration.

If you are under your full retirement age there is a limit that you may earn and not lose any benefits. If you go over that limit, you may be shocked when April 15th rolls around and you have to pay taxes. The SSA has many rules and ways that you may have your benefit decreased, but there are also ways to maximize your social security payments.

Local advisors are available to sit down and go over your options.

Comment   |  Flag   |  Mar 22, 2012 from Lititz, PA

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