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Social Security Matters: Ask Rusty – About working while collecting Social Security

by AMAC Certified Social Security Advisor Russell Gloor, Association of Mature American Citizens

Dear Rusty: In 2019 I was out of work for an extended period. I was eligible to begin receiving retirement benefits (at age 63) and started to do so in August. My part time job was limited so it did not conflict with my Social Security amount, but in October through the end of 2019 I went back to my old industry at four times the pay rate. My understanding is that I will need to pay Social Security back about $1.40 for every benefit dollar they have paid me while I worked at the higher wage. When and how is that paid? Signed: Part Time Again

Dear Part Time Again: If you started your Social Security benefits in August of last year at age 63, for the remainder of 2019 you were subject to the “first year rule” which means you had a monthly earnings limit of $1,470 after your benefit started. If you exceeded that monthly limit starting in October of 2019 and for the rest of the year, you won’t be entitled to benefits for the months of October, November and December. Social Security will consider that an overpayment, and they will want you to repay all those benefits to them. However, if it would be to your advantage to do so, you can request that Social Security use the annual earnings limit for 2019, instead of the monthly limit. For example, if using the 2019 annual earnings limit ($17,640) would result in a smaller impact to your benefits, Social Security may accommodate your request to use the annual limit. Depending upon your total earnings in 2019, you may want to consider asking that the annual earnings limit be used, instead of the monthly limit, when determining your 2019 impact for exceeding the earnings limit.

Starting in 2020 you’ll be subject to an annual limit of $18,240 (limit changes yearly). If you exceed the annual limit, SS will take back benefits equal to $1 for every $2 you are over the limit. If you’ve again stopped working at the higher amount, and now only working part-time and won’t earn more than $18,240 for this year, you’ll not be subject to the annual limit. But exceeding the 2019 monthly limit last year will still affect you.

You will receive a form from Social Security asking you to specify your 2019 income month by month for the months you were receiving benefits. Since you exceeded the monthly limit from October through December, they’ll be asking you to repay all of the benefits you received for those months. They will give you the option of either repaying them in full in a lump sum, or they will recover what you owe by withholding your monthly benefits until the overpayment is satisfied. That will mean you’ll go some months without benefits, the number of months dependent upon your monthly benefit amount and how much you owe them. Remember, you have the option to request the annual limit if it will benefit you.

Though you’ll lose benefits for some number of months now, when you reach your full retirement age (66 years and 4 months) they will automatically give you time credit for the number of months they withheld benefits and move your SS claim date forward. That will increase your monthly benefit amount slightly, and you’ll get that slightly higher benefit for the rest of your life.

One final point: In the year you reach your full retirement age the annual earnings limit will go up by about 2.5 times and the penalty for exceeding it will be less ($1 for every $3 over the limit). And when you reach your full retirement age the earnings limit goes away entirely.

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