Taking Social Security benefits early can cut thousands of dollars a year
If you work while receiving Social Security benefits before the prescribed age, benefits are temporarily withheld on earnings above the limit. For every excess 2dollars, 1dollars are withheld, and when full retirement age is reached, the withheld amount is recalculated into monthly benefits. In the short term, some early claimants can lose thousands of dollars a year.
If you keep working while receiving Social Security benefits before the prescribed retirement age, benefits are reduced for earnings above the set limit. Under the rules, for every excess 2dollars, Social Security withholds 1dollars.
In the year you reach full retirement age, the rule is applied differently. In that year, for every excess 3dollars, Social Security withholds 1dollars.
The withheld amount is not a permanent loss. Once full retirement age is reached, the monthly benefit is recalculated to reflect the amount that had been withheld.
The article explains that this holdback could cause some early claimants to lose thousands of dollars each year. It notes that it could have a major impact on short-term cash flow.
People who keep working must report annual earnings to the Social Security Administration, and those earnings are compared with wage records reported by employers. If income is not reported or earnings are misidentified, the withheld amount can change.
This rule applies to early claimants and no longer applies once they reach full retirement age. The Social Security Administration’s guidance provides the detailed limits and calculation method.
The article is centered on how the rule is applied and the principles for settling the withheld amount. The effect on each individual depends on the level of earned income and the timing of the claim.
Sources: Yahoo Finance
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