For Foss’s Arizona client, the income restrictions are not a hardship, Foss says. Instead, it is just something to keep an eye on to make sure she does not go over the income limit. She and her husband want to travel, so the jewelry making fits with their lifestyle, still brings in some money, and allows the client to do something she has always wanted to do.
Another Foss client retired from one career and took a job at Home Depot. “He wanted to have some purpose to get up each day. Many people do not want to retire today at 62 or 66 years of age, but they may want, or need, to start collecting Social Security. Sixty is the new 50, and retirement is around 75 for many, so everyone needs to know the rules for benefits,” she says.
The Social Security Administration gives examples of how benefits are withheld when someone continues to work after starting to collect Social Security payments.
One scenario uses a person who files for Social Security benefits at age 62 in January 2013 and receives a benefit of $600 a month or $7,200 for the year. During 2013, the recipient works and earns $20,800, which is $5,680 above the $15,120 limit. Social Security would withhold $2,840 of the Social Security benefit, or $1 for every $2 earned over the limit. To do this, Social Security would withhold all benefit payments from January 2013 to May 2013, which is $160 over the amount that should be withheld. Beginning in June 2013, the person would receive the $600 benefit each month for the remainder of the year. In 2014, the additional $160 that was withheld will be repaid.
A second example involves a recipient who is not yet at full retirement age at the beginning of the year, but reaches it in November 2013. Based on the best information available, Social Security determines the person will earn $41,580 in the 10 months from January through October, or $1,500 over the limit. During this period, Social Security withholds $500, or $1 for every $3 earned above the $40,080 limit. To do this, Social Security withholds the first check of the year. Beginning in February 2013, the recipient receives the $600 benefit each month for the remainder of the year. Social Security then pays the extra $100 it withheld in January 2014.
“Between 62 and 66 is ‘tweaking time’ if you want to start taking Social Security while you keep working,” Foss says. “The advisor has to know when the client will go over the limit or when it is worth giving up some benefits to keep working.”