The Critical Social Security Rule Most Retirees Misunderstand

You are receiving this email because you signed up to receive Bob Carlson's free e-letter Retirement Watch Weekly, or you purchased a product or service from its publisher, Eagle Financial Publications. [Carlson's Retirement Watch Weekly] [Retirement Reports](www.retirementwatch.com/retirement-resources/) [Retirement Articles](www.retirementwatch.com/retirement-articles/) Brought to you by Eagle Financial Publications The Critical Social Security Rule Most Retirees Misunderstand by Bob Carlson Editor, [Retirement Watch]( 02/18/2024 SPONSORED [She said, "Honey, I can’t retire," while holding back tears…]( [image]( The nightmare of my Mom being unable to retire sprung me into action. I tried every investing strategy…listened to every so-called "expert", and in the end - discovered a NEW way to easily secure $4,804/month… without any complicated investments. You simply have to make this ONE change in your brokerage account. And suddenly your investments can snowball much faster. I'm talking income that snowballs past $1,000...$3,000...all the way up to $4,804 per month. If you want one of the quickest, easiest ways to generate retirement income... [Click here to discover the secret that helped retire my parents.]( [CLICK HERE...]( Fellow Investor, [Bob Carlson]Continuing to work after age 62 can affect your level of Social Security retirement benefits, whether you are receiving benefits or not. The effects are important, but few people understand them. Knowing how continuing to work affects benefits, and might not affect them, leads to better decisions about when to claim benefits and whether to continue working. You can begin claiming Social Security retirement benefits as early as age 62, whether you are working or not. The level of benefits increases for each year you wait to claim benefits through age 70. In addition, the level of benefits can increase if you continue working, whether you claim benefits at 62 or later. Most people know delaying claiming increases Social Security benefits. But many don’t know how continuing to work can increase their benefits. Social Security retirement benefits are calculated using your 35 highest-earning years. I won’t go into the details of how benefits are calculated. (They're detailed in my book, “Where’s My Money: Secrets to Getting the Most out of Your Social Security.”) If you don’t have 35 years of earnings, you’ll be assigned an income of $0 for each of the missing years. Most of us had lower-earning years early in our careers, even after they are indexed for wage inflation. A number of people also had years with little or no earnings because they weren’t in the workforce full time, either voluntarily or involuntarily. That means if you work another year and earn more than you did in an earlier year, the earnings in the latest year will replace earnings from an earlier year among your highest 35 years. Knowing this, some people realize that working another year or few years will replace very low-earning years with higher-earning years and meaningfully increase their Social Security benefits. Others will realize they already have 35 high-earning years; working more years would have little or no effect on their retirement benefits. The amount of the monthly increase in benefits will depend on the number of low-earnings years that are replaced and the dollar differences between the new higher-earnings year and the lower-earnings years, after adjusting the lower-earning years for wage inflation. Another factor is your income level. Middle- and lower-income workers receive benefits that replace a higher percentage of their working years’ income than upper-income earners. For middle- and lower-income workers, replacing a few low-earning years with higher-earning years can generate a meaningful increase in lifetime benefits. But for someone with relatively high earnings most years, working a few more years might increase his or her monthly benefit by only a few dollars at most. After you turn 62, Social Security recalculates your benefits every year that you don’t claim benefits. It will take your earnings for the latest year, add that to your record of lifetime earnings and select the 35 years with the highest inflation-adjusted earnings. In some situations, the effects of working longer are so powerful that delaying retirement by only three to six months has the same impact on a retirement standard of living as saving an additional percentage point of earnings each year for 30 years, according to the study “The Power of Working Longer” – published by the National Bureau of Economic Research and written by Gila Bronshtein, Jason Scott, John B. Shoven and Sita N. Slavov. After the increase in monthly benefits from working longer is calculated, that’s not the end of the story. You’ll receive those higher benefits every month for the rest of your life no matter how long you live. In addition, Social Security retirement benefits are indexed for inflation. A small increase in benefits can compound to a meaningful lifetime sum when you’re retired for a couple of decades or longer and the benefits increase with inflation. [Have You Heard Of “RDZ”?]( [image]( It’s already destroying the retirements of more Americans than anything else on the planet… And forcing nearly half of all seniors to visit a food pantry or use food stamps just to eat. America’s top retirement researcher has the solution. [Click here to get the full story.]( [CLICK HERE...]( When you continue to work while receiving Social Security retirement benefits, the effects are more complicated. The calculation of your Social Security retirement benefits is a rolling, annual process when you keep working. Each year Social Security reviews the records for all Social Security recipients who work. If your latest year of earnings turns out to be one of your 35 highest years, replacing an earlier lower-earning year, Social Security will refigure your benefit and pay you any increase due. This is an automatic process. The additional benefits will be paid in December of the following year. For example, if you work and also receive Social Security retirement benefits in 2022, in December 2023, you should receive an additional payment reflecting an increase in your 2022 benefits, if the earnings in 2022 raised your benefit. Your monthly benefits going forward also will be adjusted for the increase. You also need to consider the earnings limit that’s imposed when you continue to work while receiving Social Security benefits after age 62 and before full retirement age, or FRA. At certain ages, if you earn “too much” money while claiming retirement benefits, your retirement benefits will be reduced. But this decrease is only temporary. You’ll get it back later. There’s no longer an earnings limit after you reach full retirement age. After that age, you’ll receive full benefits no matter how much money you continue to earn while working. When you’re younger than FRA during the entire calendar year, Social Security will deduct $1 from your benefits for each $2 you earn above the earnings limit. The limit is indexed for inflation each year and is $19,560 in 2022. The limit is different for the year you reach FRA. In the year you reach FRA, you lose $1 of benefits for each $3 you earn above the limit until the month you reach FRA. In addition, the earnings limit is much higher in the year you reach FRA. For 2022, the earnings limit for the year of FRA is $51,860. But losing some or all of your benefits because of the earnings limit isn’t a disaster. The loss of benefits is only temporary. Also, after you reach FRA, the benefits forfeited in earlier years will be used to increase future benefits. Exceeding the earnings limit is more like a deferral or withholding of benefits than a loss of benefits. You don’t have to guess how additional earnings might affect retirement benefits. The Social Security website has a Retirement Earnings Test Calculator you can find with a simple site search. To a better retirement, [Bob Carlson] Bob Carlson Editor, Retirement Watch Weekly Editor’s Note: There is a way you can collect thousands of dollars per month for the rest of your life -- tax-free. That’s right: You can get a check or wire transfer weekly or monthly...and not pay a single dime in taxes on them. [It’s like getting a second Social Security check](, only one you DON’T have to pay taxes on. Plus, this tax-free income source is 100% legal and approved by the IRS. And here’s the kicker: even if you don’t have enough money put away yet for retirement... even if you’re over age 60... you can still get thousands of dollars a month from this opportunity – and every penny you collect will be 100% tax-free. [Click here to find out more!]( SPONSORED [Dominate February Volatility in Free A.I. Training]( [image]( While Wall Street hangs on every word of the financial news cycle, the shrewd trader should be zeroing in on the insights offered by artificial intelligence in trading. [Show Me the Free Live A.I. Forecasts That Are Trending Now]( [CLICK HERE...]( Want More Retirement Advice? Check out my website, [RetirementWatch.com](, where you’ll find hundreds of free articles covering every aspect of retirement planning. Popular Posts: [The Overlooked Retirement Time Bomb]( [Understanding Rules of IRA Contributions]( [Strategies to Reduce Alternate Minimum Tax]( [Avoiding Expensive IRA Mistakes]( New to the Retirement Watch Community: SeniorResource.com It’s no secret that the current economic state in the U.S. is rough. We could easily give you the “cook your dinners at home” speech – but you need realistic solutions that can help right now. If you’re horrified by the prices every time you go to the grocery store, [here are 10 thrifty tips for saving money on groceries.]( About Bob Carlson: [Bob Carlson]Robert C. Carlson is the author of the books The New Rules of Retirement and Retirement Tax Guide, editor and investment director of the popular retirement newsletter, Retirement Watch, and editor of the free weekly e-letter, Retirement Watch Weekly. 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