Working While Collecting Social Security (2023)

in this video I break down the most common rules around working while collecting Social Security into a super easy to understand quick guide coming up next on holy Schmidt when you work while collecting Social Security the SSA requires that your earned income not exceed certain thresholds these thresholds are commonly called the annual earned income limit if you exceed these thresholds you have to give part or all of your Social Security payment back to the SSA if you're in your full retirement age year and this is 2023 that threshold is 56 520 anything earned in excess of this amount you have to give back one dollar for every three dollars over that limit if this is a non-full retirement age year and frankly that's most of the people watching this video that threshold is twenty one thousand two hundred forty dollars anything in excess of twenty one thousand two hundred forty dollars you will need to give back one dollar for every two dollars over that earned amount after you reach full retirement age then you can earn as much as you want there is no recapture provision and for reference full retirement age isn't something that you've circled on your calendar but it is in fact a relationship between when you were born and the time that the SSA designates that you can receive full benefits if you were born in or before 1954 your full retirement age is 66 years old if you were born in 1960 or later your full retirement age is 67 years old and if you're somewhere in between it goes up by two months per year from 1954 to 1960. there's some quirky challenges to this test however the first is that the earned income test is based on a calendar year but often people do not retire on December 31st so the SSA has a few simple rules that allow you to compensate for this the first is that you can designate your first year as a gray sheer the grace your provision allows you to turn the annual test into a monthly test and anything you earn prior to receiving your first social security check is not deemed to count towards your earnings limit the Proviso to this is that you must stay underneath the monthly equivalent of your annual earnings in order to qualify for this exception you simply take the numbers that I gave you before and divide them by 12 and that becomes your monthly income limit if this is the year would you reach full retirement age your monthly limit is 47.10 if this is a non-fra year your monthly limit is 17.70. let me explain with a few simple examples also stick around to the end because I'm going to answer three common questions around this calculation that won't be explained in the examples all right let's get into it we're going to start by assuming that this is a non-fra year which is the vast majority of you who are watching this video considering what to do next by the way let's assume that you are a 63 when you retire in May of 2023 in January February March and April you earn six thousand dollars per month that's twenty four thousand dollars during the first four months of the year twenty four thousand is over the twenty one thousand two hundred forty dollar limit by 13 percent but you have not yet collected any Social Security let's also assume that the SSA says your monthly payment is two thousand dollars per month and that you also choose not to work even part-time time for the rest of the year even though you're over the limit in 2023 by 13 percent you have no earned income for the remainder of the year so you owe nothing back to the SSA let's change this example and assume that you earn fifteen hundred dollars per month from May through December so a total of thirty six thousand dollars because the first twenty four thousand dollars was earned prior to you receiving your Social Security payment and because fifteen hundred dollars per month no month exceeds Seventeen hundred seventy dollars again you would owe nothing to the SSA but what if one or more of the months exceeded the Seventeen hundred seventy dollars let's assume that in May you earn fifteen hundred dollars in June you earn Seventeen hundred seventy one dollars so one dollar over the 1770 limit July twenty five hundred dollars and then back to fifteen hundred dollars a month from August forward because this is a great year the SSA would take back your June payment of two thousand dollars despite the fact that you were only one dollar over the limit in July they would do the same thing when you earned twenty five hundred dollars August onward you earned less than Seventeen seventy per month fifteen hundred per month is your earnings so they would resume paying you your two thousand dollars a month from that point forward but it's important to note that they will never take back more they will never recapture more than what you would have owed if this was an annual test let me explain let's assume that you still earn 24 000 in the first four months of the year you earn Seventeen hundred seventy one dollars in May and 2500 per month from that point forward so June through December twenty five hundred dollars per month the months of May through December were each in excess of 1770 per month so the SSA would recapture the two thousand dollar per month payment to you in these months but the maximum they could recapture would be the amount you would have owed if this was an annual test in this example you're earned twenty four thousand dollars the first four months of the year and nineteen thousand two hundred seventy one dollars during the back eight months of the year your total earnings for the year would be forty three thousand two hundred seventy one dollars that's twenty two thousand Thirty One dollars over your annual limit since you need to give back one dollar for every two over your annual limit this means that you would owe the SSA a total of eleven thousand six 16 dollars in 2023 this means that they'll take two thousand dollars per month in May June July August and September we'll take 1016 in the month of October which means in October you receive 984 dollars and you will then continue to receive your monthly payment of two thousand dollars in the month of November and in the month of December a common question is what happens to the payments that they've taken well in this example the SSA has taken seven months worth of your Social Security payment at full retirement age they recalculate your payment and assume that you retired seven months later the longer you wait to claim Social Security the higher your monthly payment on average this is about half a percent per month so at full retirement age your Social Security payment goes up by seven months times half a percent or three and a half percent and a payment for every month from that point forward is three and a half percent higher than it was pre-fold retirement age another common question is what constitutes earnings well in a nutshell it's earnings from employment or net earnings from self-employment pension doesn't count drawing down from your IRA or 401K doesn't count interest income from your Investments doesn't count dividends don't count capital gains don't count and most of the time annuities do not count is simply the income that you receive when you work either for someone else or work for yourself another common question is what happens if someone is receiving the spousal benefit or a child benefit based on your Social Security well if your Social Security is suspended their social security is suspended the sole exception to this is if you're divorced and your ex is drawing a spousal benefit off of your Social Security this video answers a lot of common questions that exist about working while collecting Social Security but it doesn't capture all of them if you have a question that wasn't answered because of the information in the video please put in the comment section below and I will try to answer it I can't promise you that I'll get to every question but I certainly try to get too many of them however we have a wonderful Community here on holy Schmidt and if I can't get to your question there's a very good chance that someone will so put it in the comments section below and please if you see a question that you know the answer to go ahead and comment so that others can benefit from your wisdom also if you like this video and you want to see more of me please click subscribe and turn on notifications so that you get alerted the next time post a video I post about twice a week finally check out this video on common purchasing mistakes that retirees make they cost them thousands of dollars this is Jeff Schmidt thanks for watching

Channel: Holy Schmidt!

Views: 60,910

Keywords: social security earnings test, social security earnings limits, social security earnings limit, social security earnings limit 2022, working while collecting social security, working while collecting social security 2023, grace year exception, grace year exception, grace year, social security earnings limit thresholds, social security earnings limit 2023, social security earnings limit 2023, social security, social security benefits, ssi, social security benefit

Id: 94kf9avr6Ws

Length: 8min 27sec (507 seconds)

Published: Mon Nov 21 2022