Dear Rusty: I will turn 66 in June of next year. I do not plan to stop working but I do plan on starting to collect my Social Security. How soon can I start to collect without having to give it back because my income is too high? And after I start collecting will I still have to pay into the program with deductions from my current salary, and if I do, will those payments from me help to increase what I will be able to collect from SSA? Signed: Planning Ahead
Dear Planning Ahead: Social Security’s earnings limit goes away when you reach your full retirement age (FRA), which for you is 66. So, if you claim Social Security benefits to start in June of next year you do not need to worry about your earnings causing Social Security to take back benefits – you’ll have reached your full retirement age (FRA) and the earnings limit disappears at your FRA. But, whether you can claim any earlier in the year without it affecting your benefits depends on your earnings level.
Starting next year, because that will be the year you reach your FRA, the usual earnings limit ($17,640 for 2019) will be about 2.5 times greater, or a little more than this year’s limit of $46,920 for those in their FRA year. So, if you claim benefits to start before June when you reach your FRA, you’ll be subject to that higher 2020 annual limit and – depending on the month you claim – perhaps a monthly limit (the annual limit divided by 12). Exceeding the annual limit will cause Social Security to take back some of your benefits, and if you exceed the monthly limit you won’t be entitled to benefits for that month. However, if your income starting next year won’t exceed those limits you can claim earlier in the year without having benefits withheld. And if you don’t start your benefits before June of next year you won’t be subject to an earnings limit at all next year, nor for any year thereafter. And just to be sure you’re aware, you can apply for Social Security about three months before you want your benefits to start – but if you want to start benefits at your FRA just be sure to specify June 2020 as your benefit start month. For clarity, you can get benefits for the full month of June, the month you reach your FRA, regardless of the day of the month you were born.
As to your question about continuing to pay into the program, yes, for as long as you continue to work you will need to pay Social Security FICA payroll taxes – everyone who works and earns must pay that tax. But paying Social Security FICA, by itself, doesn’t increase your benefit. What may affect your benefit is if your current earnings are more than the inflation-adjusted earnings in any of the 35 years used to compute your benefit when you start Social Security. Each year, Social Security will look at your annual earnings and, if an increase is appropriate because you have more recent higher earnings, they will automatically make that adjustment for you.
Russell Gloor is an Association of Mature American Citizens certified social security advisor. To submit a question, visit amacfoundation.org/programs/social-security-advisory or email email@example.com.