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Ask the Expert: The rules for working while collecting Social Security

I reached my full retirement age (FRA) last year. I'm still working full time. Is there a penalty for starting to collect Social Security while working? I want to collect my maximum benefit without penalty.

Since you've reached your FRA, you can collect Social Security while you work without a penalty. But it still might make financial sense to postpone your benefit.

First, the rules:

When people work and collect Social Security before reaching FRA, their benefit is reduced if their earned income exceeds an annual limit. (If you're under FRA for all of 2021, you forfeit $1 of benefit for every $2 you earn above $18,960. If you reach FRA in 2021, you forfeit $1 for every $3 earned above $50,520 until your birthday month.)

Once you reach FRA, there’s no benefit reduction no matter how much you earn. But your tax bill may go up. Here’s why:

If you're married filing jointly, up to 50% of your benefit might be taxed if your "provisional income" — half your Social Security benefits plus all your other income (including tax-exempt income) — is between $32,000 and $34,000. If your provisional income exceeds $44,000, up to 85% of your benefit might be taxed. Single taxpayers may owe taxes on up to 50% of their benefit if their provisional income is between $25,000 and $34,000; if it's over $34,000, up to 85% of their benefit may be taxed.

Talk to your tax accountant. If you don't actually need Social Security, you may want to delay it until you're no longer working. There’s a bonus for that delay, too. Your benefit amount grows for up to four years when you postpone collecting it after reaching FRA.

The bottom line

Collecting a Social Security benefit while you work involves potential trade-offs.

More information

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