Early Social Security Benefits While You Work

If you're thinking about continuing to work after you've started getting benefits from Social Security, consider how much you earn first

. In some cases, the decision might not be good for you nest egg - the Social Security Administration has disincentives for those who take the benefits before the member reaches full retirement age.

Social Security has been upping the FRA, or Full Retirement Age, gradually through the years. Although the program still bases full retirement payouts on the member's highest earnings for 35 years, the said age is now from 66 to 67 years old, depending on the year you were born.

One downside to collecting benefits before the full age of retirement is the permanent reduction of what you'll receive based on when you started getting benefits. For instance, collecting at the age of 62 (the earliest age when you can get benefits) gives you approximately seventy percent of full retirement age benefits. Another significant disincentive is that if you choose to work while you collect Social Security, there's a reduction in benefits: one dollar per two that you earn above the annual limit of $14,160. The last disadvantage to getting benefits in this case is that while your income goes up the ladder, your benefits (usually tax-free) will be hit with taxes.

If you're earning more than $14,160, you won't get a good part of the benefits you were originally entitled to. If your goal is to earn big after you've started collecting early, how much you're earning from retirement work will result in the taxation of benefits - this renders whatever benefits you have in mind negligible or almost useless.

If you want to collect your Social Security benefits early on for whatever purpose, make sure that you don't earn amounts that will trigger taxes resulting in the significant reduction of your benefits. Talk to your financial advisor or tax planner to see if early Social Security collection is beneficial or unfavorable to your retirement finances.

by: Carina Smith

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