The Social Security Income Penalty

December 16, 2014 // Bucket Strategy Investing

If you’re still working and are considering taking Social Security benefits, or if you’re currently receiving Social Security benefits and will be returning to the workforce, it’s important to know that your benefits could be reduced or eliminated under certain circumstances.

You can get Social Security retirement or survivor benefits and earn a paycheck at the same time. But, if you are younger than full retirement age for the entire year, the SSA will reduce your benefits by $1 for every $2 you that earn above $15,480 (under current law). If you reach full retirement age during the year, they will deduct $1 from your benefits for every $3 you earn above $41,400 until the month you reach full retirement age.

You should also be aware that not all of your income will count toward Social Security’s earnings limits. If you work for someone else, only your wages matter. If you’re self-employed, it’s only your net earnings from self-employment that they’ll look at. Income such as other government benefits, investment earnings, interest, pensions, annuities, and capital gains are disregarded for these purposes (although they do count an employee’s contribution to a pension or retirement plan if the contribution amount is included in your gross wages). Also, if you work for wages, your income counts when it is earned, not when it is paid. If you have income that you earned one year, but the payment was made in the following year, it will not be counted as earnings for the year you receive it.

There is also a special rule for the first year that you retire. If you retire midyear and you’ve already earned more than the annual earnings limit, you can get a full Social Security check for any whole month you are retired regardless of your annual earnings.

Social Security rules can be complex. For more information about Social Security benefits, visit the SSA website at, or call (800) 772-1213 to speak with a representative.

This blog content is being provided for educational and informational purposes only and should not be construed as investment, tax, or legal advice or a solicitation to buy or sell any specific securities product. The information provided is based on current laws, which are subject to change at any time, and has not been endorsed by the Social Security Administration or any government agency. Lucia Capital Group and its subsidiaries are not affiliated with the Social Security Administration.

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