Collecting Social Security but Coming Out of Retirement? 3 Things Worth Noting

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Inflation is wreaking havoc on Americans’ financial lives, and retirees — many of whom live on a fixed income — are acutely feeling the pain.

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These days, with side hustles being all the rage, many retirees may be considering going back to work to make a money on the side while collecting Social Security. However, resuming work while collecting Social Security presents some caveats you should consider before making the move. 

“Social Security beneficiaries who go back to work may earn more in the short term and also may eventually increase their monthly benefit checks,” Joe Elsasser, founder and president of Social Security claiming software provider Covisum, told CNBC. But they could also be subject to short-term benefit changes that require detailed planning ahead of time.

“The surprise that people want to avoid … is not knowing the earnings test is going to happen and that they’re going to have a penalty,” Elsasser said.

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Your Social Security Benefits May Be Temporarily Reduced 

Before you reach full retirement age, earning over certain limits reduces your Social Security benefits temporarily.

As of 2022, prior to the year in which you reach full retirement age, the SSA deducts $1 from your benefits for each $2 you earn above $19,560. In the year you reach full retirement age, the SSA deducts $1 from every $3 you earn above $51,960 until you reach full retirement age.

Ultimately, though benefits are reduced for a time, those who return to work are still set to earn more because of what they’re making through employment.

You May Get A Fatter Check Down The Road 

If you are subject to the earnings penalty, your benefit will be recalculated later on, and that could make for a fatter monthly check down the road in your retirement. This is because retired workers later recoup what they “lost” in benefits.

Once an employee reaches full retirement age, the SSA tallies up the amount by which benefits were reduced because of earnings, and it treats each month’s reductions like delayed benefits. Then, as GOBankingRates has previously reported, it credits those benefits back. Because delayed benefits increase your regular full-retirement-age benefit, you make out better in the long run.

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Communicate With The SSA, Stat

Planning to return to work is a personal decision, but you can’t keep it to yourself forever. If you’re going to re-enter the workforce after retirement, you need to notify the SSA immediately. This way the agency can start reducing your checks ASAP.  

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If you don’t communicate with the SSA right away, you could be in for a nasty surprise when the IRS reports your income to the agency. Better to be honest than to be sorry. 

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About the Author

Nicole Spector is a writer, editor, and author based in Los Angeles by way of Brooklyn. Her work has appeared in Vogue, the Atlantic, Vice, and The New Yorker. She's a frequent contributor to NBC News and Publishers Weekly. Her 2013 debut novel, "Fifty Shades of Dorian Gray" received laudatory blurbs from the likes of Fred Armisen and Ken Kalfus, and was published in the US, UK, France, and Russia — though nobody knows whatever happened with the Russian edition! She has an affinity for Twitter.
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