A person can collect Social Security benefits while working, but there are some rules and considerations to be aware of:
- Earnings Test: If you are younger than your full retirement age and earn more than certain annual limits, your Social Security benefits will be reduced. For 2024, the limit is $22,320; if you earn more than this amount, your benefits will be reduced by $1 for every $2 you earn above the limit. In the year you reach full retirement age, the limit increases (to $59,520 in 2024), and the reduction is $1 for every $3 above the limit until the month you reach full retirement age.
- Taxation of Benefits: If you work while receiving Social Security benefits, part of your benefits might be subject to federal income taxes depending on your combined income (your adjusted gross income + nontaxable interest + half of your Social Security benefits).
- Impact on Investment Income, Pensions, Annuities, or Capital Gains: Generally, earnings from work do not directly affect income from investments, pensions, annuities, or capital gains. However, higher total income could lead to more of your Social Security benefits being taxed. This doesn’t reduce the Social Security benefits themselves but could affect your overall tax liability.
- Effect on Spouse and Children’s Benefits: If you receive reduced benefits due to earnings over the limit, it could also reduce the benefits that your family receives based on your record. The total family benefit is capped by a family maximum, which could be affected if your benefits are reduced.
It’s important to plan carefully and consider the implications of continuing to work while receiving Social Security benefits, especially in terms of how it might affect your overall financial situation and tax obligations.
-Nguyễn Bách Khoa-