Social security with income

Two of my nieces, Charlotte and Penelope, are both 2 years old. And when we get together they are the best of friends. But one thing they haven’t learned very well is sharing.

One of them will give the other a toy. They’ll then rip it back, both get sad, and they’ll end up fighting. It’s both cute and sad at the same time.

Social security can feel a bit like that. We’ve heard many of our clients say, “Hey, I turned on my social security because I thought I was allowed to. I got to age 62, and then they made me give it all back!”

With social security there are different rules from age 62 up until your full retirement age.

Now what are those rules? Let’s start with the easiest one.

Rule #1 – From full retirement age on, you can earn as much money as you want and still collect social security.

I guarantee you the richest people in America are still collecting social security after they reach their full retirement age.

Now let’s reverse and go backwards until the age 62 up to full retirement age. There is a dollar amount that you’re able to earn, which changes each year.

When I say earn, I’m referring to earned income, or earnings from work. Examples are if you’re self-employed, or if you have a job, those type of earnings.

The dollar limit is typically somewhere in the $18k, $19k, $20k range. And again, every year that number is adjusted. For every dollar you earn over and above that limit, whatever that limit may be, social security is going to take back 50 cents ($0.50).

If the limit is $20k and you earned $30k that year, they’re not going to just take away all your social security. But $30K is $10k more than $20K. Half of that, 50 cents of that, is $5k. They’d take back $5k of your social security.

If you earn a lot of money, they’ll take back all of your social security.

This is not a tax. They don’t take the money back and it’s gone forever. They take it back and they just give you more money later on. Remember: The longer you wait, the higher your social security benefit is.

That’s important because if you’re still working, you may not be able to take your social security benefit if you are below that full retirement age.

Rule #2 – The year you turn your full retirement age.

The year you turn your full retirement age, the rules go out the window. You’re allowed to earn a much higher dollar amount, somewhere in the $60k range. That number is adjusted every year too.

Rule #3 – From full retirement age on.

So you have to be aware of how that plays out. But there’s really 3 different rules you have to be aware if you are working.

And those three rules are 1. From age 62, up to full retirement age. 2. The year you are to enter full retirement age. 3. And then from full retirement age on. And knowing where you are, will impact when you can take social security.