How Much Can You Make Collecting Social Security?
Social Security is a crucial program in the United States that provides financial support to retired individuals, disabled workers, and the surviving family members of deceased workers. Many people wonder how much they can make while collecting Social Security benefits. The answer to this question depends on several factors, including your earnings history, age at retirement, and whether you are working or not.
Understanding Your Earnings History
Your earnings history plays a significant role in determining how much you can make collecting Social Security. The Social Security Administration (SSA) calculates your primary insurance amount (PIA), which is the monthly benefit you are entitled to receive at your full retirement age (FRA). Your PIA is based on your average indexed monthly earnings (AIME) over your highest 35 years of earnings.
Impact of Age at Retirement
The age at which you choose to start collecting Social Security benefits can also affect your monthly income. If you start collecting benefits before your FRA, your monthly payment will be reduced. Conversely, if you wait until after your FRA, your monthly payment will increase. The reduction or increase is based on a formula that takes into account the number of months between your FRA and the age at which you start collecting benefits.
Earnings While Collecting Social Security
If you are collecting Social Security benefits and continue to work, your monthly income may be affected. For individuals under their FRA, there is a limit to how much they can earn without incurring a reduction in their Social Security benefits. In 2021, the limit is $18,960 for those born in 1955 or earlier, and $19,560 for those born in 1956 or later. For every $2 earned above the limit, your Social Security benefit is reduced by $1.
Impact of Post-FRA Earnings
Once you reach your FRA, there is no limit to how much you can earn while collecting Social Security benefits. However, if you continue to work and earn above a certain amount, your benefits will be subject to a tax. In 2021, individuals with a combined income (including earnings and other taxable income) of more than $34,000 for single filers and $44,000 for married couples filing jointly will have 50% of their Social Security benefits taxed.
Maximizing Your Social Security Benefits
To maximize your Social Security benefits, it is important to understand the factors that affect your monthly income. Here are some tips to consider:
1. Plan your retirement strategy by considering your desired retirement age and when you want to start collecting Social Security benefits.
2. Keep track of your earnings history and ensure that you report all earnings to the SSA.
3. Consult with a financial advisor or Social Security expert to help you navigate the complexities of the program.
In conclusion, the amount you can make collecting Social Security depends on various factors, including your earnings history, age at retirement, and whether you are working or not. By understanding these factors and planning accordingly, you can ensure that you receive the maximum possible benefits from this valuable program.
