Question

I would like people to know the following if it ever comes up for you for an article.

I retired from teaching in June, 2019. I was 63 years old. I went to apply for my Social Security for the rest of 2019, and was told I could NOT collect until 2020 because I had made over the limit in 2019. I had earned about $60,000 in 2019.

I know others who were under age 66 and collected as retired teachers. I went twice to Social Security to confirm and was told I could not collect until the new year when I had no earnings.

This was a complete shock to me and obviously, I was depending on collecting or I would have retired in December 2019. Obviously, I did NOT do my homework.

I am in New Jersey. Does the info above make sense to you? Even though it's passed, I still think of others and wonder why some collected and I couldn't.

Answer

It sounds like a game of telephone, where the message became slightly distorted by the time it reached your reader, says Jim Miller, CFP®, president, Woodward Advisors.

“The issue, in this case, most certainly revolves around retiring before full retirement age (FRA) and starting to collect Social Security benefits in that year,” he says. “If you are younger than FRA and earn more than the yearly earnings limit, Social Security will reduce your benefit amount.”

Miller explains, “If you are under full retirement age for the entire year, they will deduct $1 from your benefit payments for every $2 you earn above the annual limit. For 2020, that limit is $18,240.”

“In the year you reach FRA, they will deduct $1 in benefits for every $3 you earn above a different limit. In 2020, this limit on your earnings is $48,600,” he adds. “They only count your earnings up to the month before you reach your full retirement age, not your earnings for the entire year in this case.”

When you reach full retirement age:

Beginning with the month you reach full retirement age, your earnings no longer reduce your benefits, no matter how much you earn.

They will recalculate your benefit amount to give you credit for the months we reduced or withheld benefits due to your excess earnings.

You could have waited until the end of the year to retire, to start the next year off clean from an earnings standpoint, Miller notes. However, if you go back to work at any point before FRA you need to be aware of the earnings limit.

Read Early or Late Retirement.

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