Hi, I’m David Hovis, financial advisor at Hovis & Associates. This video is the first in a series about Social Security. Today, I’ll discuss claiming your Social Security benefit early and the earnings limits if you are under Full Retirement Age.
To start, I want to define what Full Retirement Age or FRA means. This is a technical term in the eyes of the Social Security Administration. It is an age based upon the year you were born, between the age of 66 and 67. When you reach FULL Retirement Age, you are eligible for your FULL retirement benefit.
Now, many people choose to claim their benefit BEFORE they reach their Full Retirement Age. This results in receiving a reduced benefit for the rest of your life. The maximum reduction is 30% for workers with a full retirement age of 67. Before you make that decision to draw your benefit early, it’s important to understand that an Earnings Test may also apply. The Earnings Test for 2021 states that if you are under the full retirement age and still working, you can earn up to $18,960 before your benefit will be reduced. If you earn more than $18,960 and are claiming your benefit, $1 of your benefit will be withheld for every $2 earned above this limit.
There is also a special rule for the year in which you retire, if you retire prior to Full Retirement Age. This states that any earnings you receive BEFORE starting your Social Security benefit will not count towards the earnings test. Once you begin receiving your benefits, you can work part time and still receive your entire monthly benefit as long as you earn less than the monthly limit of $1,580.
Finally, the year that you reach Full Retirement Age has yet another rule. There is a higher earnings limit of $50,520 for the months before you reach full retirement age. If you exceed this income limit, $1 in benefits will be withheld for every $3 you earn above $50,520. Once you reach your full retirement age, there is no longer an income limit or earnings test.
There are a lot of factors to consider before signing up for Social Security benefits, especially if you are under full retirement age and still working, even part time. Make sure you understand the rules if you choose to claim early. For help with planning for your retirement, call Hovis & Associates to schedule a meeting. You can also check out our website, YouTube or social media. Stay tuned for our next video in the series……Drawing your benefit at Full retirement Age.
Until next time….