Not every retiree wants to spend all day on the golf course or relaxing at the beach. Some people continue to work after retirement: in their own businesses, as consultants or at other full- or part-time jobs. In some cases, the money you make while working will reduce the amount of your monthly Social Security check; in other cases, you can earn all you want with no impact on your check. Knowing the rules can help you decide whether to put in more hours on the job or on the golf course.
You can retire and begin collecting Social Security as early as age 62, but you’ll collect a smaller check than if you waited until your full retirement age, which ranges from 65 to age 67, depending on your birth date. The Social Security Administration considers anything before your full retirement age as early retirement. Until you reach your full retirement age, for every $2 you earn over a set minimum, the Social Security Administration will deduct $1 from your monthly benefit check. For 2012, the minimum is $14,640. You can earn up to this amount with no impact on your benefit check.
The Year You Reach Full Retirement
If you take early retirement and work, in the year you reach your full retirement age, the money you earn has less impact on your Social Security benefits. During that year, up until the month you reach your full retirement age, the amount you can earn with no penalty rises. In 2012, you could make up to $38,880 in the months before you reach your full retirement age. After that, every $3 you earn reduces your benefits by $1.
Beginning with the month you reach your full retirement age, or if you wait until your full retirement age to begin collecting Social Security, you can work and earn as much as you like, with no reduction of your benefit check.
Only money you earn in the form of wages or self-employment income affects your Social Security benefits. Money from pensions, retirement savings or investments is considered unearned income and has no impact. If you’re self-employed, only your net income, not your gross receipts, is considered.
Even if your work income temporarily reduces your Social Security benefit check, working after you retire could increase your Social Security payout. The Social Security Administration reviews your work history records each year. If you have high earnings, it will refigure your benefit amount. And if the money you make working results in a reduction in your monthly benefit check now, you’ll get the money back later, in the form of a slightly larger check when you reach full retirement age.
Cynthia Myers is the author of numerous novels and her nonfiction work has appeared in publications ranging from "Historic Traveler" to "Texas Highways" to "Medical Practice Management." She has a degree in economics from Sam Houston State University.