Social Security Retirement Income—Earn All You Want and Still Collect
Full Benefits
Because of a prior rule on limitations in social security benefits based
on age of starting benenfits, some people still think there are limits on how
much you can earn and still collect all of the social securityretirement income
to which you are entitled. That is still true for people who opt to
take social security before full retirement age. However, those working after
full retirement can have unlimited amounts of earned income and still collect
their full social security retirement benefit. Here’s the rule
and then let’s look at an example.
Rule: If you are under full retirement age when
you start getting your Social Security retirement payments, $1 in social security
benefits will be deducted for each $2 you earn above $12,960 (for 2007). In
the calendar year you attain full social security retirement age, $1 in benefits
will be deducted for each $3 you earn above $34,440 (for 2007) up to the month
of full retirement age attainment.
Hypothetical example:
Mrs. Smith, age 62 in March of 2007, decides to retire from employment and
start her reduced social security retirement benefits at the rate of $12,000
annually ($1,000 per month). She also decides to start a business. By
age 63, her business is earning a net profit of $20,000 annually. She will
need to give up $3,520 of her annual social security retirement income for
this reason: During those months before you reach full retirement age (age
66 for someone born in 1945 like Mrs. Smith), your social security benefits
are reduced $1 for each $2 you earn over $12,960 (for 2007).
Mrs. Smith keeps working at her business and by 2011, the year she reached
full retirement age, her business is earning $40,000 annually. For January
and February of 2011, she must give up $309 of social security ($1 for every
$3 her business earns over $34,440 in the year she reaches full social security
retirement age) and once March 2011 arrives and she becomes 66, she can earn
unlimited amounts from her business and will never give up any social security
income.
For the test above, earnings include bonuses, commissions and vacation pay,
but don't include pensions,
annuities, investment income, interest, veterans or other government or
military retirement benefits.
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