What's the Social Security formula for reimbursing retirement benefits that were withheld from your monthly check before you reached full retirement age?
You're talking about the fact that if you work while collecting Social Security before reaching your full retirement age, you may temporarily forfeit some benefit, depending on your earnings.
Social Security withholds $1 of benefit for every $2 you earn over $15,480 until the year you turn 66. Then it withholds $1 of benefit for each $3 you earn over $41,400 until your birthday month. Thereafter, you don't forfeit any benefit, no matter how much you earn, and your primary benefit is recalculated to make up for what was withheld earlier.
To understand the recalculation formula, you must remember that your Social Security benefit is reduced for each month you start taking it early. That's true whether or not you continue working. For example, if your benefit at 66 would be $1,400, but you start Social Security at 65, you get $1,306. Start at 64, and you get only $1,214.
So let's say you take a $1,214 benefit at 64 and continue working. As a result of your earnings, some benefit is withheld from your monthly checks until you're 66. Let's say for that 24-month period, the total dollars withheld add up to $14,568 -- i.e., 12 months' worth of your $1,214 monthly benefit.
When you turn 66, the agency returns those 12 months worth of withheld benefit by recalculating your primary benefit as if you'd started collecting Social Security 12 months later than you did -- at age 65 instead of age 64. The result: Going forward, your monthly benefit is $1,306.
The bottom line If you work while collecting Social Security, your benefit check may be temporarily reduced, depending on your earnings and your age.
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