The Mistake: Ignoring Work Rules for Early Benefits
Many Americans make the mistake of claiming benefits early while also working. In theory, that should net you more money on a monthly basis, right? Well, that’s not exactly true.
If you want to claim early while also working, you should know that you’ll risk cutting your Social Security by $1 for every $2 you make over an annual limit. In 2019, this annual limit came to $17,640 for those who had not yet reached their full retirement age.
But watch out, these cuts don’t disappear once you reach your FRA. Instead, you’ll see a $1 cut for every $3. $46,920 was the annual limit for 2019 in this case. That’s another thing people don’t pay attention to, the fact that each year will provide them with different thresholds.
Solution: Budget For Early Retirement
When you start your budgeting plan, make sure you don’t forget about these cuts in Social Security if you plan on working while also claiming early. Poor planning could put you in delicate situations for a while, even if your cash flow should return to normal after you reach your full retirement age.
If you’ve decided that the best way you should approach retirement is by claiming your benefits early while also staying in the workforce, just make sure you’re fully prepared. Leaving out such significant cuts, either by oversight or forgetfulness, could set you back quite a lot!
