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Although unemployment has been rampant during the COVID-19 crisis, some retirees may begin to think about rejoining the workforce sometime this year. Many people’s retirement savings took a hit in March when the stock market plummeted, and while have largely recovered, we do not know what the rest of the year has in store for us. That means that a large amount of 401 (k) or IRAs could receive an additional beating in the course of 2020, which would lead some older people to return to work in an effort to leave their savings alone and allow their wallets to recover. the lost value.
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If you’re collecting Social Security, you may wonder if you’re even allowed to return to work and how it might affect your benefits. Here’s what you need to know if you’re thinking you might need a job sometime this year.
Your age matters
First, let’s get one thing out of the way: you They are allowed to work and collect Social Security at the same time. But whether that affects your benefits will depend on your age.
Once you reach full retirement age, you can work and earn as much as you want without making a difference to your benefits. This is what the full retirement age looks like, depending on the year you were born:
Let’s say you claimed Social Security before full retirement age and are thinking about going back to work. If that’s the case, you may withhold a portion of your benefits if your income exceeds a certain threshold known as a proof of earnings limit.
The proof of earnings limit changes from year to year. In 2020, you can earn up to $ 18,240 without affecting your benefits. From there, you will have $ 1 in Social Security withheld for every $ 2 you earn.
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However, if you will reach full retirement age in 2020, that limit increases to $ 48,600, and only once you exceed that point will you begin to retain benefits. When that happens, you will temporarily lose $ 1 in Social Security for every $ 3 you earn.
Exceeding the profit test limit does not mean losing benefits permanently. Rather, the amount withheld will be added to your benefits once you reach full retirement age so you can get more from Social Security in the future. But if your goal on returning to work is to earn enough money to completely leave your savings alone, you’ll need to cut down on the numbers to make sure that doing so enables you to reach that goal.
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Another approach? Get a part-time job so you can stay within your limits.
At a time when COVID-19 remains a very large threat, many older people may choose to stay home. But if money becomes a problem, going back to work may seem like a good solution. Just make sure you understand how it could affect your Social Security income before finalizing that decision.
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