The Social Security Earnings Test–How it Can Impact Post-Retirement Plans - The Motley Fool

Much has been written about the absence of substantial savings among future retirees, and one of the reflex actions of many entering into Social Security eligibility is to plan to continue working after claiming benefits before their full retirement age. Sounds like a good plan, but there is a catch–it’s called the Social Security Earnings Test. As explained in a post by The Motley Fool’s Katie Brockman, working after claiming benefits is in fact a good way to help accumulate cash for later years, but in the short term filers need to be aware that there is the potential for benefits being withheld. Read her post here…

Ms. Brockman’s post points out that the withholding of benefits is actually a temporary setback, since upon attaining full retirement age withheld benefits are used to recalculate one’s monthly benefit. Over time, the amount withheld will be repaid to you actuarily in the form of a higher monthly benefit. Ms. Brockman also notes that working after filing and before reaching full retirement age could improve your monthly benefit, since you’re continuing to pay FICA tax on your earnings. We would note, though, that the amount of earnings would need to be substantial enough to replace one of the annual earnings amounts included in the highest 35 years of inflation-adjusted earnings in our work record. This is true of earnings after reaching full retirement age, also.

Yes, it can be complicated, so if you need assistance on this, feel free to contact the AMAC Foundation’s Social Security Advisory Service. This is a free-to-the-public service provided by AMAC’s non-profit affiliate, and instructions on how to access the service can be found here…

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