Planning to Work While Claiming Social Security Early? Brace Yourself for This.

Source The Motley Fool

You can't claim Social Security retirement benefits until you turn 62, but there's no rule saying you have to be retired to do so. Many Americans choose to receive benefits while they're still working.

For some, it's a chance to enjoy a higher standard of living than they could off their paychecks alone. For others, it gives them the opportunity to gradually reduce their hours without affecting their monthly income.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

These strategies work well for some people. But for a certain group of workers, claiming Social Security while working comes with a hidden cost.

Two businesspeople discussing something in an office.

Image source: Getty Images.

Early claiming comes at a cost

The Social Security Administration assigns everyone a full retirement age (FRA) based on their birth year. It's 67 for most workers today, though some older adults have FRAs as early as 66. You're allowed to apply sooner than this, but if you do, it's considered claiming early.

This gets you more checks, but it also reduces the size of each one. You lose 5/9 of 1% per month for up to 36 months of early claiming and 5/12 of 1% per month thereafter. Those with FRAs of 67 can lose up to 30% by applying for benefits right away at 62.

Early claimers who continue to work are at risk of even greater benefit reductions due to the earnings test. Under this rule, $1 is withheld from their benefits for every $2 they earn over $23,400 in 2025 if they will be under their FRA all year. Those who will reach their FRA in 2025 only lose $1 for every $3 they earn over $62,160. If they are at or over their FRA, they don't have to worry about the government withholding money from their checks for the earnings test, regardless of their annual income.

It's possible that some workers could get nothing from Social Security because of the earnings test. That could be a problem if they had counted on that extra income to cover some of their current expenses, but the withheld benefits are not gone forever.

Withheld funds come back to you after FRA (slowly)

Those who have money withheld due to the earnings test get it back in the form of a benefit adjustment at FRA. The government looks at how much it withheld previously and uses this information to determine the size of the increase. This is a one-time change. After this, you'll continue to get your new, higher amount for the remainder of your life with only small increases for cost-of-living adjustments (COLAs).

Though this is better than losing the money altogether, it might be less desirable for some than getting that extra money today. It may not always be possible, but if you can limit how much income you earn from your job, you might be able to minimize how much the earnings test takes from you or even avoid it altogether.

Keep an eye on your income throughout the year. And if you notice your Social Security checks begin to shrink due to the earnings test, you might have to adjust your budget accordingly.

The $22,924 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Bitcoin Falls Below $90K: BitMine & Bitwise Executives Predict Market Bottom This Week​Bitcoin's recent drop below $90,000 may signal a market bottom, according to industry leaders.
Author  Mitrade
Yesterday 05: 54
​Bitcoin's recent drop below $90,000 may signal a market bottom, according to industry leaders.
placeholder
Top 3 Price Prediction: Bitcoin, Ethereum, Ripple – BTC, ETH and XRP Look for a Foothold After a Sharp ShakeoutBitcoin trades near $92,600 after a dip below $90,000, while Ethereum around $3,118 and XRP near $2.21–$2.23 sit on key support zones, as BTC, ETH and XRP all try to turn a sharp correction into a tradable rebound rather than a deeper slide.
Author  Mitrade
Yesterday 06: 52
Bitcoin trades near $92,600 after a dip below $90,000, while Ethereum around $3,118 and XRP near $2.21–$2.23 sit on key support zones, as BTC, ETH and XRP all try to turn a sharp correction into a tradable rebound rather than a deeper slide.
placeholder
Gold Price Forecast: XAU/USD edges higher above $4,100 ahead of delayed US September NFP reportGold price (XAU/USD) attracts some buyers to around $4,110 during the early Asian session on Thursday. The precious metal gains momentum amid the cautious mood and uncertainty over the US economy. Traders will closely monitor the US September Nonfarm Payrolls (NFP) later on Thursday. 
Author  FXStreet
11 hours ago
Gold price (XAU/USD) attracts some buyers to around $4,110 during the early Asian session on Thursday. The precious metal gains momentum amid the cautious mood and uncertainty over the US economy. Traders will closely monitor the US September Nonfarm Payrolls (NFP) later on Thursday. 
placeholder
Even As Bitcoin's Price Falls, Michael Saylor Feels 'Indestructible'The price of Bitcoin dipped below $89,000, setting a new weekly low as corporate buyer Strategy remains bullish.
Author  Mitrade
10 hours ago
The price of Bitcoin dipped below $89,000, setting a new weekly low as corporate buyer Strategy remains bullish.
placeholder
Could XRP Really Catch Ethereum? Analysts Revisit the Question as ETF Tailwinds BuildAs US spot XRP ETFs roll out and issuers like Canary Capital and Franklin Templeton step in, analysts say XRP’s market cap could climb on growing utility and ETF accumulation—but overtaking Ethereum’s $373 billion smart-contract powerhouse remains a long-shot, at least for now.
Author  Mitrade
9 hours ago
As US spot XRP ETFs roll out and issuers like Canary Capital and Franklin Templeton step in, analysts say XRP’s market cap could climb on growing utility and ETF accumulation—but overtaking Ethereum’s $373 billion smart-contract powerhouse remains a long-shot, at least for now.
goTop
quote