Ask the Expert: What's the effect of working while getting Social Security?

I'm 63 years old and still working. I know if I take Social Security early, my benefit is reduced if I earn more than $18,000. Is this money recoverable or is it lost forever?

It's not lost forever.

You can collect Social Security and work at the same time. But if you’re younger than your full retirement age (FRA), you may forfeit some of your benefit payment, depending on your earnings.

In 2021, if you're under your FRA for the entire year, $1 is deducted from your benefit payment for every $2 you earn above $18,960. If you reach FRA in 2021, $1 of benefit payment is deducted for every $3 you earn above $50,520. The deductions stop the month you reach your FRA, no matter how much you earn.

Every year, the government recalculates your benefit amount. To understand the recalculation formula, remember that your benefit is always reduced for each month you start taking it early, whether or not you work. A simple example: If your benefit at 66 would be $1,400, but you take it at 65, you get $1,306. Start at 64, and you get only $1,214.

Let's say you take a $1,214 benefit at 64 and also continue working. Because of your earnings, you forfeit some benefit until age 66. Let's say over those two years, the total amount withheld adds up to 12 months' worth of your $1,214 monthly benefit.

When your benefit is recalculated at 66, the government returns the 12 months of forfeited amount by recalculating your benefit as if you'd started collecting Social Security 12 months later — at 65 instead of 64. Going forward, your monthly benefit is $1,306.

The bottom line

If you work while collecting Social Security, your benefit may be temporarily reduced depending on your earnings and your age.

More information

bit.ly/SSAretirementplanner

bit.ly/SSAearningstestcalculator