If you’re like most people, you’re very likely going to rely on Social Security as one of your most important income sources once you retire.
Unfortunately, you could end up losing out on some of the income you were expecting from the program. As many as 58% of workers face a high likelihood of getting less benefits than anticipated, at least temporarily. Here’s why.
Many workers don’t realize this could cost them their benefits
The Transamerica Center for Retirement Studies says that 58% of current workers anticipate continuing to work at least part-time during retirement.
There are some definite benefits to holding a job as a senior. With a paycheck coming in, you won’t be as reliant on your savings. You can even continue saving for the future rather than draining your nest egg. You’ll also have something to do to fill your time, and might remain eligible for valuable employer-provided benefits.
But there’s also a potential problem if you are trying to earn a paycheck and collect Social Security at the same time. If you are under your full retirement age (FRA) when you try to collect Social Security and you still work, you could forfeit some of your benefits.
Don’t count on double dipping with Social Security and a paycheck
Social Security has rules for collecting a paycheck and retirement benefits before reaching FRA — the designated age when the program enables people to get their standard benefit. For those born in 1956 or later, FRA is between 66 and 4 months and 67, depending on your birth year. But many people claim benefits at a younger age since payments become available at age 62.
If you work during the year after starting Social Security and you won’t reach FRA at any point in that year, you’re going to forfeit $1 in benefits for every $2 you make above $19,560 (as of 2022). And if you haven’t yet hit FRA and are working but you’ll reach FRA at some point during that year, you forfeit $1 in benefits for every $3 you earn above $51,960.
Many of the 58% of employees planning to work while collecting Social Security might be unaware of this rule and will lose benefits, creating big issues for anyone who anticipated getting both a paycheck and a full Social Security check.
The good news is that eventually you will be credited for the benefits you didn’t get. Your check amount will be recalculated once you reach FRA, leaving you with more money each month.
But until you hit FRA, you can’t expect to double dip with a paycheck and full Social Security benefits, too. Just remember this as you calculate your sources of retirement funds.
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