There’s no law against working after you retire — but your benefits may be reduced.

To insure Social Security’s integrity as a source of basic financial support after retirement, there are limits on what you can earn while collecting your payments before you reach full retirement age (FRA). Then you can earn as much as you want and still get your full benefit.

You can also collect your full benefit if you receive special payments after you retire that you actually earned beforehand. Typical examples include accumulated vacation pay, sales commissions, and deferred salary. Similar rules apply to some self-employment income.

According to Social Security, some people entitled to receive benefits postpone them unnecessarily because they expect this income.

Social Security says if you’re self-employed and work over 45 hours a month, you’re not retired.

It says if you’re self-employed and work less than 15 hours a month, you’re retired.

Working part-time

You may be thinking about working after retirement because you need the money to supplement what Social Security and other retirement benefits provide toward your basic living expenses, because you’d like the extra cash to spend on things you enjoy, or because you really like working. Part-time employment or consulting may be the answer.

Many employers like to hire part-time workers because they may not have to provide health insurance, retirement plans, and other benefits. If you have health benefits through your former employer, are insured through your spouse’s plan, or are eligible for Medicare, you don’t care about coverage at your post-retirement job. You may also find part-time positions that are open to people who can work during school hours, when students are in class.

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You might also work as a consultant for your former employer, utilizing the skills you’ve spent a career developing. You’ll want to check, though, to be sure you’re eligible to work and collect your pension at the same time. A significant percentage of retired people also start their own businesses, sometimes in areas related to their previous employment. You might also investigate a profession that makes you feel as if you’re using your knowledge and abilities to benefit others, perhaps through tutoring, coaching, counseling, or something that’s important to you.

The limits 

If you’re receiving Social Security, there may be a fixed amount you can earn each year without losing some of your benefit. As a rule, the dollar amount goes up each year to reflect increases in the cost of living.

The dividing line is full retirement age (FRA), after which you can earn as much as you like without reduction in Social Security benefits. FRA is 66 for people born between 1943 and 1954, and then increases each year for people born between 1955 and 1959, until it reaches 67 for people born in 1960 and later.

The consequences of earning more than the limit is fewer checks from Social Security. Before you reach FRA, you lose $1 for every $2 over the limit, and the year you reach FRA you lose $1 for every $3 over the limit.

However, the limits apply only to earned income, not pensions, annuities, investment earnings, or any government benefits. However, you don’t forfeit the benefits that are withheld. They’re added to your base benefit at full retirement age, increasing the amount you receive then.

Does it pay to work?

It’s a judgment call. If the amount you earn is going to reduce your benefit significantly, it may not pay. In general, though, if your earnings are low enough to allow you to get any benefit while you’re working, you make out better taking what you’re entitled to. Because the limit is widely publicized, you can also set a work schedule that allows you to earn every penny you can without penalty — and no more.

Benefits postponed

If you’re younger than your FRA, collecting benefits, and expect to earn more than the cap for your age, you must provide an earnings estimate by calling Social Security at 800-772-1213. The Social Security Administration (SSA) also uses what you earned the previous year to predict what you’ll earn in the next year.

If you expect to earn enough to have some benefit withheld, the number of benefit checks you receive will be reduced. Rather than receiving your first benefit payment of the year in January, it might be paid in May or August, or whenever, depending on your income.

Changing your mind

It is true that once you begin receiving your Social Security payments you’re locked into the base amount. But you can change your mind about getting the payments, pay back the total amount you’ve received, and start over again — at a higher base — later on. Since 2011, you have the right to make this change just once after you begin to collect your benefit, and you must act within 12 months of receiving your initial benefit payment.

For example, if you retire and begin to receive benefits when you’re 62 but are offered a position that’s too good to turn down, you can stop your Social Security payments. As long as you repay any benefits you got, you can start again with a clean slate when you’re ready to quit working for good. Whatever you’ve earned in the period when you returned to work can increase the amount you’re eligible to receive. Your benefit will also be larger because you are older.

Working After Retirement

Special rules 

If you’re younger than full retirement age and retire in the middle of the year, you might have already exceeded the annual earnings limit. So in the year you retire, special rules apply. You can get the full benefit you’re entitled to in any month that you’re actually retired, no matter what you earned earlier in the year.

But once the Social Security payments start, you can’t earn more in a month than one-twelfth of the maximum annual earnings limit. If you go over that limit in any month, you lose the entire benefit for that month. But the next month you start over.

What retired means?

When your income is from self-employment, defining retirement is a little tricky. The SSA uses the number of hours you spend working during a month as the measuring stick. If you work fewer than 15 hours, you’re considered retired. If you work more than 45 hours, you’re definitely not. And then there’s the gray area in between, when the quality of the work you do, as well as the time you spend doing it, has to be considered.

The rules are complex. The SSA encourages people in this situation to get in touch with a representative.

What Happens If You Work After Retirement? Rules, Benefits, Social Security by Inna Rosputnia

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