Tom Jones has decided to begin taking Social Security benefits this year when he turns 62. Tom’s brother, David, began taking Social Security benefits in January of 2017. David’s 66th birthday is in October. Tom plans to continue working as a consultant for the software company from which he is retiring. David, who is a CPA, has continued to work three days a week at the accounting firm where he has been employed since taking benefits.

Tom Jones can take Social Security Benefits and continue to work. However, since Tom’s full retirement age is 66 and he is only 62, the maximum amount that he can earn without penalty in 2017 is $16,920.00 ($1,410.00 a month).   Since Tom’s part-time income will be over that amount, Social Security will reduce his monthly benefit by $1.00 for every $2.00 he earns over the limit.

Each year the amount that a person in Tom’s position can earn without penalty will increase. The 2018 annual earnings limit for those between age 62 and 65 will be $17,040.00.  

David Jones can continue to work after taking Social Security benefits. During the year that he turns 66, David can earn up to $44,880.00 and retain all of his monthly benefits.  However, Social Security will reduce his benefits from January through October (the months before he turns 66) by $1.00 for every $3.00 that he earns over that amount in 2017. If David continues to work in 2018, he can earn an unlimited amount without reduction in his Social Security benefits.

The same rule will, of course, apply to Tom in the year that he turns 66. Assuming the Social Security rules remain unchanged, Tom will be able to earn the maximum amount allowed for that year without reduction of benefits.  His benefits will be reduced $1.00 for every $3.00 earned, over that amount. At age 67 and thereafter, if he works, his benefits will not be reduced, regardless of his income.   

Many retirees find the rules regarding receipt of Social Security benefits and continuing to work mystifying. Those who are considering or intend to continue working after taking benefits should go to https://www.ssa.gov/planners/retire/whileworking.htlm for more details on this issue. Retirees who do not realize that their Social Security benefits will be reduced when they earn more than the maximum amounts without penalty, may neglect to budget their spending accordingly. This neglect could lead to having to withdraw savings or even incur debt due to overspending.

Sandra W. Reed is an attorney with Katten & Benson, an Elder Law firm in Fort Worth. She lives in beautiful Somervell County, near Chalk Mountain.