Q & A: January 2021

Q & A: January 2021

Can I Work and Receive Social Security Benefits at the Same Time?

Q:  I lost my job a few months ago and at age 64, recently started Social Security retirement benefits.  I just found out that I can work and still receive benefits at the same time.  Can you tell me how this works?  I thought you could lose your Social Security check?

A:  That’s correct, you can work while receiving a Social Security retirement, or survivors’ benefit.  The Social Security Administration even says it could eventually mean a higher benefit for you, but it could also mean that your Social Security benefits may be reduced — at least temporarily — when you earn more than the annual limit.  In addition, your earnings may subject a portion of your Social Security benefits to taxation.

Here’s how it works:  Because you are under your full retirement age in 2021, you are subject to Social Security’s earnings restriction rules.  The Social Security Administration will deduct $1 from your benefits for every $2 you earn above the annual exempted amount, which is $18,960 ($1,580 per month) in 2021.

In the year you reach your full retirement age, 66 and 6 months, you may earn a little more.  The Social Security Administration will deduct $1 in benefits for every $3 earned above a slightly higher annual exempted amount.  For example, in 2021 beneficiaries who reach full retirement age may earn $50,520 or $4,210 per month.

The good news is that in the years following attaining full retirement age, you may earn as much as you want without reduction to your benefits.

Here’s an example of how it might work in 2021, assuming you start work on February 1, 2021.  Let’s assume you are entitled to a Social Security benefit of $900 per month ($10,800 for the year).  You work and earn $35,200 ($16,240 over the $18,960 exempted amount) during the year.  Your Social Security benefit would be reduced by $8,120 ($1 for every $2 that you earned over the limit).  You would receive only $2,680 of your $10,800 for the year. ($10,800 - $8,120 = $2,680.)

It’s important to note that Social Security would completely suspend payment of your benefits until the withholding of benefits due to excess earnings (the amount over $18,960) are accounted for.  If you do start to work, you will need to contact the Social Security Administration as soon as possible and report what you expect to earn in 2021.

You can use the Social Security Administration’s earnings test calculator to see how earnings could affect your benefit payments.