Collecting Social Security but Coming Out of Retirement? 3 Things Worth Noting


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Inflation wreaks havoc on Americans’ financial lives, and retirees — many of whom live on fixed incomes — are feeling the pain acutely.

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Today, many retirees are considering returning to work to earn money while collecting Social Security. However, resuming work while collecting Social Security comes with some caveats to consider before switching.

“Social Security beneficiaries who return to work can earn more in the short term and can eventually increase their monthly benefits as well,” Joe Elsasser, founder and president of Social Security software provider Covisum, told CNBC. But they can also be subject to short-term changes in benefits that require detailed planning in advance.

“The surprise that people want to avoid … is not knowing that the income test is going to take place and they will be fined,” said Elsasser.

Your Social Security benefits may be temporarily reduced

Before you reach full retirement age, earning certain limits will temporarily reduce your Social Security benefits.

Beginning in 2022, prior to the year you reach full retirement age, the SSA will subtract $1 from your benefits for every $2 you earn above $19,560. In the year you reach full retirement age, the SSA deducts $1 from every $3 you earn above $51,960 until you reach full retirement age.

While benefits are reduced for a time, those who return to work will still end up earning more because of what they earn through work.

You may get a thicker check along the way

If you’re subject to the income penalty, your benefit will be recalculated later, and that could make for a thicker monthly check later in retirement. This is because retired employees later get back what they “lost” in benefits.

Once an employee reaches full retirement age, the SSA adds up the amount by which benefits have been reduced due to earnings, and each month’s reductions are treated as deferred benefits. Then, as GOBankingRates previously reported, those benefits are refunded. Because deferred benefits increase your normal full retirement benefits, you’ll be better off in the long run.

Communicate with the SSA, Stat

Planning to return to work is a personal decision, but you can’t keep it to yourself forever. If you return to work after retirement, you must notify the SSA immediately. This way, the agency can start lowering your checks as soon as possible.

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If you don’t communicate with the SSA right away, you could be in for a nasty surprise when the IRS reports your income to the agency. Better to be honest than sorry.

This article originally appeared on Collecting Social Security but Retiring? 3 things worth mentioning

The Valley Voice
The Valley Voice
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.


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