Washington, DC - Ask Rusty - Working & Social Security:
Dear Rusty: I recently turned 62, and have not yet filed for Social Security benefits. At this point my benefit based on my own record would be about $1,000 per month, but since I still work I know I would lose some of what I earn over the $15,000 limit. I read that if you lose some of your benefit because of working you will get it back later. Is this true? If so, how would I get it back? Signed: Working Girl
Dear Working: Yours is becoming a much more common question as more and more people are choosing to work even after they are entitled to receive Social Security benefits. Social Security's rules say that if you work and are receiving benefits but have not yet reached your full retirement age (which for you is 66) and you earn more than their annual earnings limit, they will "take back" half of everything you earn over the earnings limit (which for 2017 is $16,920). The way they do this is by withholding what you owe from future benefit payments, which could cause you to not receive benefits for a number of months until they recover what you owe. This would happen every year up to the year you turn 66, which would mean that during that working timeframe you would have gone some number of months without receiving Social Security. In the year you turn 66, the amount you can earn is much more generous and the amount they withhold is much less. After you turn age 66 you can earn as much as you like without penalty.
The way you "get back" what they withheld is this: When you reach your full retirement age, Social Security will recalculate your benefit amount taking into account the number of months you did not receive benefits in those working years between age 62 and 66. They will then advance your original start-of-benefits date by the number of months you didn't receive benefits, effectively moving your start date forward and increasing your benefit amount accordingly. If, for example, you originally applied at age 62 and continued to work and, over the course of those years between age 62 and 66, you did not receive benefits for a total of 12 months, when you reached age 66 your benefit start date would be moved to age 63 and instead of receiving the $1,000 per month for the rest of your life, you would get about $1,070. So while they do take away some benefits while you are working, the increase you receive at your full retirement age will last for the rest of your life.