Work and Draw SS: A Game of Give and Take?


by David D. Holland



We have often discussed the many decisions that have to be made as you approach retirement. Should you take Social Security (SS) at 62? 65? Should you wait until you reach Normal Retirement Age or age 70? (Normal Retirement Age is the age at which you receive full Social Security benefits.) It’s not an easy decision, and each person’s situation is different.


Holland FinancialCollecting Early.
Sometimes, people choose to take Social Security at age 62, fully aware that they will be receiving less money on a monthly basis than if they waited until their Normal Retirement Age. It is important to keep in mind that, if you draw SS benefits at 62 and continue to work, the Social Security Administration (SSA) will withhold benefits at the rate of $1 for every $2 you earn over an annually announced dollar amount. This is called the “earnings test,” and it applies to people under their Normal Retirement Age who collect SS retirement benefits and are also employed.


How Much Can I Earn?
For 2017, you can earn up to $16,920 (this is called the “annual earnings exemption amount”) before the SSA starts holding back $1 for every $2 you earn. It’s important to note that you don’t permanently “lose” the money that is withheld. When you reach your Normal Retirement Age, your monthly benefit will be adjusted to make up for the months in which benefits were withheld.

To make things even more complicated, in the year you reach your Normal Retirement Age, the annual earnings exemption amount jumps significantly. If you reach it in May 2017, for example, you can earn up to $44,880 in the months prior to your Normal Retirement Age date. The withholding rate also changes to $1 withheld for every $3 earned.


Keeping It All.
Here’s the good part. In the month you reach your Normal Retirement Age (and from that point forward), no benefits will be withheld, no matter how much money you earn! Now, remember, we are only talking about the Social Security earnings test here, and not income taxes. That’s a whole other ball of tax wax! How much of your SS will be taxed is determined by your other income sources for the year. Yes, it certainly can be confusing, but knowledge is power – and my team and I are always here to help.


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