Ask the Experts: How Will My Job Affect My Early Social Security Benefit?

Q. I’m age 62 and trying to decide whether to take early Social Security benefits. I make about $30,000 a year at my job. Is it correct that if I take my benefit early, Social Security will withhold about $8,000 from my annual benefit of $14,000? Also, when I reach full retirement age at 66, will I get my full amount even if I’ve taken my benefit early?

A. First, your understanding of the earnings penalty on early Social Security benefits is accurate. When you’re at least age 62, but haven’t reached your full retirement age, your benefit is reduced by $1 for every $2 you earn over $14,160 in 2009. If your benefit is $14,000 per year, and you’re earning an annual $30,000, your benefit will be reduced by $7,920.

If you take early Social Security benefits, you will continue to get a lower monthly amount when you reach full retirement age. But working after 62 will probably raise the amount of that early benefit somewhat. The Social Security Administration will increase your full retirement benefit for every month of payments you forfeited because you worked. If your pay increased your average lifetime earnings, that will also boost your benefit.

If you decide to wait to collect Social Security benefits, the amount will increase 8 percent for each year you decline to collect it. So on average, the amount that people lose by waiting to collect is offset by higher payments when they do retire.

Source: Shane Barber, Barber Financial Group, Lenexa, Kan.