The Social Security Earnings Limit That You Should Know

What You Need to Know About Working When Receiving Retirement Benefits

If you have previously determined to take Social Security benefits before full retirement age, and you earn more than the annual income limit, your Social Security benefits will decrease until you reach full retirement age.

But you don't need to worry, the social security rules state that investment income is not calculated against the annual income limit. Because the only income that counts is the income earned, such as the income you earn by working. either income for someone, or as an entrepreneur.

That's why numbones.com will explain the social security income limits that you must know before you decide to buy social security insurance. In addition, by understanding about the social security limits that you receive, you will not feel lost or cheated if your income feels less than you expected. We also provide a summary of social security income limits in 2017 and 2018.

The Social Security Earnings Limit That You Should Know


The Social Security Earnings Limit That You Should Know

What is Social Security Full Retirement Age?

The full-benefit retirement age of Social Security increased gradually because the law was passed by Congress in 1983. Traditionally, full age was 65, and early retirement benefits were first available at age 62, but still with permanent reductions of up to 80 percent of benefits full amount. At present, full age is 66 years and 2 months for people born in 1955, and will gradually increase to 67 years for those born in 1960 or later. And the benefits of this early retirement will continue to be available at the age of 62, but they will decrease more. When the age of full benefits reaches 67, the benefits taken at age 62 will be reduced to 70 percent of the full benefits and the benefits taken first at the age of 65 will be reduced to 86.7% of the full benefits.
In one of the social security regulations, there is a financial bonus for delayed retirement. An individual who reaches full age benefit in 2017 (66 years and 2 months) receives a monthly allowance of 8% higher for each year he postpones collecting benefits. When the age of full benefit reaches 67, benefits claimed at age 70 will be 24% higher due to the delay. The maximum retirement benefit in 2017 for someone who waits until the age of 70 to collect benefits is $ 3,540 a month.

When the Social Security law was signed into law in 1935, the full retirement age was 65 years. But when the funds for Social Security were reduced and the population increased, the government began to change the regulation. For those born after 1937, full retirement age has gradually increased to this day, where it is now between 66 and 67, depending on the year you were born. Here's a table to help you find out your full retirement age:

Birth of Year
Full Retirement Age
1943-1954
66
1955
66 and 2 months
1956
66 and 4 months
1957
66 and 6 months
1958
66 and 8 months
1959
66 and 10 months
1960 and later
67

How Much Will You Earn From Social Security

For regulations set in 2019, it states that the annual income limit for those under Full Retirement Age (FRA) is around $ 17,600. This shows that by 2019, you can earn up to $ 17,600 and receive all your Social Security benefits. Even if you haven't entered full retirement age, you will still receive all your social security benefits. And this regulation is an increase from the 2017 limit of $ 16,920 and the 2018 $ 17,040 limit. Change the full retirement age based on your year of birth, so you should use a calculator to determine the estimated amount of benefits you will get.

If you get a total allowance of more than the limit, there is a set of rules that determine how much of your Social Security benefits will be reduced. And to date, there are three different income rules that apply. It depends on whether you produce before, during, or after your year reaches full retirement age.

The three rules of income in social security are as follows:

1. Earned Income From Social Security Before Your Year Reaches Full Retirement Age

If you intend to collect Social Security benefits, and get more than the annual income limit, Social Security will take back $ 1 from Social Security for every $ 2 that exceeds the limit. Wow, I know what you think, this is a serious reduction.

This reduction applies to any year before you reach retirement age. And you don't need to worry, because this rule only applies to income earned after you start collecting Social Security benefits. So if you work part of the year, the income you will earn before the month you start collecting Social Security benefits is not calculated against the annual income limit.

Additional Note: Sometimes the official Social Security website page uses the term "Normal Retirement Age", which means the same as Full Retirement Age (FRA).

2. Earned Income From Social Security During The Year You Reach FRA

The second Social Security Regulation states that during the year you achieve FRA, and until your month reaches FRA, Social Security will deduct $ 1 for every $ 3 you earn that exceeds the annual income limit, but different income limits apply the year you reach FRA.

Regulations In 2019, the income limit is $ 46,900 during your year reaching FRA. This is a significant increase from 2018, when you make up to $ 45,300. And this regulation increases  about $ 480 from 2017. During this year, Social Security only calculates the income you receive before your month reaches FRA.

Case in point: Suppose you were born in 1952, which means FRA you are 66 years old. And you will be 66 years old in June 2019 and start your Social Security allowance at that time, but you continue to work until the end of the year, and get $ 44,000 for this year. Because of this, your profits will not decrease because you get less than $ 46,900 for that year.

The Social Security official website itself also provides additional examples of how this deduction works. You can also calculate your total income using an income test calculator, and install the expected date of birth and income to see if you think the deduction will apply to you.

3. Income Earned From Social Security After You Reach FRA

After you reach FRA, you are no longer bound to the rules regarding annual income limits. And you can get as much income as you like without reducing your Social Security benefits. But don't forget, your benefits are still subject to income tax.

What Things are Calculated as Income in Social Security?

Unemployment is not calculated as income on the income test above. But if you get a salary, income is calculated when it is received, not when paid. The IRS provides additional details about what is considered and not considered as income in social security.

Social Security Income Limits Indexed To Inflation

The income limit will adjust upwards every year depending on the formal measure of inflation which is the Consumer Price Index. In the table below you can see last year's limit for pre-FRA. And you will know that in the years where inflation did not change it was quite low or negative.
Year
Limit ($)
2019
17,640
2018
17,040
2017
16,920
2016
15,720
2015
15,720
2014
15,480
2013
15,120
2012
14,640
2011
14,160
2010
14,160
2009
13,560
From the table above, we can conclude that the social security income limit continues to increase every year. Just like the social security earnings limit 2017 worth $ 16,920. Whereas the social security earnings limit 2018 increased to $ 17,040. And in 2019 it continued to increase to reach $ 17,640. Changes in the value of this social security limit depend on the amount of inflation. So along with the increase in the value of inflation, it will also increase the limit of income from our social security.

Are Social Security Benefits Taxable?

The sortest answer is yes, income from Social Security is taxed. How much do you have to pay taxes on your Social Security benefits depending on your level of income. If you have other sources of retirement income, such as 401 (k) or other part-time jobs, then you also have to pay income tax on your Social Security benefits. But if you only rely exclusively on your Social Security check, you may not be taxed for your benefit.

How to Avoid the Earnings Limit in Social Security

How do you avoid the income limit? The best way to avoid the income limit is to wait until you reach FRA to start your benefits. Because some people have no choice and must start benefits because they are laid off, and eventually they have no income or other assets. If this problem occurs to you, but then your situation changes and you return to work, you can withdraw your application for Social Security within 12 months of the benefits starting.

However, other people also have choices like this, maybe they can use a portion of their savings or pension to persuade them until they reach FRA. This way might be a better choice than starting Social Security early.

Social Security Spousal Benefits

If you have a partner, you can claim a Social Security benefit based on your own income record, or you can take a partner allowance that will give you 50% of your spouse Social Security allowance calculated at full retirement age (FRA).

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