Denver, Colorado – As individuals approach retirement age, many find themselves facing tough decisions about when to start claiming Social Security benefits and how continuing to work may impact their benefits. A 63-year-old individual in Denver, Colorado recently sought advice on whether they could apply for Social Security and still work, expressing concerns about potential limitations on their hours and earnings. Understanding the complexities surrounding claiming benefits early and working can be crucial in making informed decisions about retirement planning.
According to experts, if you choose to claim Social Security at 63, four years before the full retirement age of 67, your monthly benefit will be reduced by about 25%. Additionally, individuals who continue to work before reaching their full retirement age are subject to Social Security’s “earnings test.” This test sets an annual earnings limit, with penalties imposed on those who exceed it.
For those collecting early Social Security benefits, such as the individual in question, the 2024 earnings limit is $22,320, subject to annual adjustments. If annual earnings surpass this limit, Social Security will implement a penalty of $1 for every $2 over the limit, withholding future benefits until the excess amount is recovered. To avoid potential overpayment issues, it is advisable to inform Social Security in advance if you anticipate exceeding the annual earnings limit. This proactive approach can help prevent disruptions in benefit payments.
Ultimately, the decision on whether to claim Social Security early while continuing to work depends on the individual’s expected annual earnings from their work-at-home position. If earnings remain under the annual limit, benefits will not be affected. However, consistently exceeding the limit significantly may render individuals ineligible for benefits until they earn less or reach full retirement age, when the earnings limit no longer applies.
Therefore, individuals seeking to navigate the complexities of Social Security and employment must carefully consider their earnings and the potential impact on their benefits. Seeking guidance from financial advisors or retirement experts can provide valuable insights into making informed decisions about claiming Social Security and balancing work responsibilities. By understanding the rules and regulations surrounding early benefit claims and working, individuals can strategically plan for a secure retirement future.