Social Security retirement benefits help to replace income lost once a person reaches retirement age. The amount of benefits a person receives depends on the number of years worked and the amount of money earned while in the workforce. A person can continue to work and apply for Social Security benefits, though certain benefit reductions may result once a person reaches full retirement age.
The Social Security Administration allows eligible participants to apply for early retirement at the age of 62 or delay filing up until the age of 70. In general, the earlier a person files the smaller his monthly benefit entitlement once he reaches full retirement age, though people who choose to continue work after filing may actually increase their overall benefit allotment. Full retirement age varies depending on a person's year of birth. People born before the year 1965 become eligible for full retirement benefits at the age of 65. People born after 1965 become eligible for full retirement benefits at the age of 67. With this range of retirement options, different conditions apply for people who choose to work while applying for Social Security benefits.
Early Retirement Options
The Social Security retirement fund receives a portion of its funding from employee payroll taxes withheld during a person's time in the workforce. So, someone who files early and continues to work will still make tax contributions into her retirement fund. On the other hand, someone who files early and doesn't continue working will see a reduction in their total retirement benefit allotment. People who do continue working can still receive retirement benefits, though their earnings will result in a smaller monthly benefit amount until they reach full retirement age.
Yearly Earnings Limits
Social Security sets certain yearly earnings limits on people who continue to work once they apply for early retirement benefits, according to the Social Security Administration's reference site (ssa.gov). As of the time of publication, anyone making over $14,160 per year will see a $1 deduction for every $2 earned above the $14,160 yearly limit. This deduction amount comes out of a person's monthly retirement benefit check. For the year in which a person reaches full retirement age, Social Security raises the yearly limit to $37,680 and only deducts $1 for every $3 earned above the limit. Once a person reaches retirement age, monthly benefit amounts remain unaffected regardless of how much a person earns per year.
When calculating a person's monthly retirement benefit, the Social Security Administration bases monthly amounts on earnings made during the best thirty-five years in the workforce. So, someone who files for early retirement can potentially receive a larger benefit allotment once he reaches full retirement age depending on how much he earns per year. In effect, a year of high income earnings may replace one of the lower income years and raise a person's overall benefit allotment. To ensure the Social Administration records any earnings made after filing, applicants can submit copies of their W2 forms to their local Social Security office.
- Jupiterimages/Brand X Pictures/Getty Images