Are you working and claiming? Maximize your Social Security benefits with this essential tip!
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Navigating the labyrinth of Social Security rules can be as daunting as planning a cross-country trip without a map. But fear not, intrepid travelers of The GrayVine community!
We're here to shine a light on a lesser-known Social Security rule that could significantly boost your retirement income, especially if you're working while claiming benefits.
Understanding the Social Security Earnings Test
First, let's address a common misconception: that earning a paycheck while receiving Social Security benefits will always lead to a smaller monthly check. This isn't necessarily true, and here's why.
The Social Security earnings test is a pivotal factor for those who haven't yet reached their full retirement age, which is 67 for anyone born in 1960 or later.
If you're still working, the earnings test examines your income and applies a threshold. For 2025, the thresholds are $23,400 for those not reaching full retirement age and $62,160 for the year you do.
If your earnings exceed these limits, the Social Security Administration (SSA) will withhold $1 for every $2 or $3 you earn above the threshold, depending on your age.
While this might sound like a penalty, it's actually a temporary measure. Once you reach full retirement age, the SSA recalculates your benefit to account for the withheld amounts, potentially leading to a larger benefit down the line.
The Hidden Rule That Could Mean More Money for You
Now, let's delve into the secret sauce of Social Security benefits: the Average Indexed Monthly Earnings (AIME).
You might like: Think you can beat the system? The truth about taking Social Security early
The SSA calculates your AIME by adjusting your past earnings for inflation, selecting the 35 highest-earning years, and averaging them. This figure is crucial in determining your benefit amount.
Here's the kicker: the indexing stops at age 60. After that, your earnings aren't adjusted for inflation in the AIME calculation.
Also read: Maximize your Social Security checks: Insider secrets from a former manager!
However, if you continue to work past 60, your newer, likely higher earnings due to inflation can replace one of your lower-earning years within the top 35. This can lead to a recalculated, and often higher, benefit.
For those aiming for the maximum possible Social Security benefit, this means working beyond the traditional retirement age could be a smart move. It's a detail that's easy to miss but can have a profound impact on your retirement income.
Source: CBS News / Youtube.
Why This Matters to You
You might be thinking, “I've already planned my retirement; why change course now?”
The truth is, the landscape of retirement is ever-changing, and understanding these nuances can make a significant difference in your financial well-being.
For our GrayVine readers who are working into their 60s and beyond, this information is particularly valuable.
It's an opportunity to reassess your retirement strategy and potentially increase your Social Security benefits.
Read next: Planning to retire in 2025? Here are 7 reasons why launching a side hustle today could be your best move
Have you experienced a boost in your Social Security benefits by working longer? Are you considering adjusting your retirement plans based on this information? Share your stories and insights in the comments below!
We're here to shine a light on a lesser-known Social Security rule that could significantly boost your retirement income, especially if you're working while claiming benefits.
Understanding the Social Security Earnings Test
First, let's address a common misconception: that earning a paycheck while receiving Social Security benefits will always lead to a smaller monthly check. This isn't necessarily true, and here's why.
The Social Security earnings test is a pivotal factor for those who haven't yet reached their full retirement age, which is 67 for anyone born in 1960 or later.
If you're still working, the earnings test examines your income and applies a threshold. For 2025, the thresholds are $23,400 for those not reaching full retirement age and $62,160 for the year you do.
If your earnings exceed these limits, the Social Security Administration (SSA) will withhold $1 for every $2 or $3 you earn above the threshold, depending on your age.
Working while collecting Social Security benefits could lead to a temporary reduction in benefits if you have not yet reached the full retirement age due to the Social Security earnings test. Image source: CBS News / Youtube.
While this might sound like a penalty, it's actually a temporary measure. Once you reach full retirement age, the SSA recalculates your benefit to account for the withheld amounts, potentially leading to a larger benefit down the line.
The Hidden Rule That Could Mean More Money for You
Now, let's delve into the secret sauce of Social Security benefits: the Average Indexed Monthly Earnings (AIME).
You might like: Think you can beat the system? The truth about taking Social Security early
The SSA calculates your AIME by adjusting your past earnings for inflation, selecting the 35 highest-earning years, and averaging them. This figure is crucial in determining your benefit amount.
Here's the kicker: the indexing stops at age 60. After that, your earnings aren't adjusted for inflation in the AIME calculation.
Also read: Maximize your Social Security checks: Insider secrets from a former manager!
However, if you continue to work past 60, your newer, likely higher earnings due to inflation can replace one of your lower-earning years within the top 35. This can lead to a recalculated, and often higher, benefit.
For those aiming for the maximum possible Social Security benefit, this means working beyond the traditional retirement age could be a smart move. It's a detail that's easy to miss but can have a profound impact on your retirement income.
Source: CBS News / Youtube.
Why This Matters to You
You might be thinking, “I've already planned my retirement; why change course now?”
The truth is, the landscape of retirement is ever-changing, and understanding these nuances can make a significant difference in your financial well-being.
For our GrayVine readers who are working into their 60s and beyond, this information is particularly valuable.
It's an opportunity to reassess your retirement strategy and potentially increase your Social Security benefits.
Read next: Planning to retire in 2025? Here are 7 reasons why launching a side hustle today could be your best move
Have you experienced a boost in your Social Security benefits by working longer? Are you considering adjusting your retirement plans based on this information? Share your stories and insights in the comments below!
