Receiving Social Security benefits doesn’t mean you can’t get money from other sources. Additional income can be helpful in unexpected needs or emergency situations. But it’s important to be cautious, especially if you start taking benefits before the full retirement age of 67.
The Income Limit and Its Effects
People who receive benefits before their full retirement age have a certain limit imposed on their income. For example, if you’re under 67 and earn more than $19,560 per year, your additional income could affect your benefits.
Practical example:
- If you take benefits of $1,000 per month and earn $22,000 annually, you’re earning $2,440 more than the income limit ($19,560).
- For every $2 of additional income, $1 will be deducted from your benefit. This means you’ll lose $1,220.
This can be a large amount, but after you reach full retirement age, the income limits end, and you can earn freely.
Income that does not affect Social Security benefits
- Dividends
- Income you receive from investments, bonuses, or savings is not included in the Social Security income limits. This means that such income before the $23,400 limit will not affect your benefits.
- IRA Distributions
- If you withdraw money from your Individual Retirement Account (IRA), it will not be counted in the income limits. This money will not affect your benefits.
- Pensions
- Your pension payments through retirement plans will not influence your Social Security eligibility rules. The benefit rule works until you reach retirement age.
- Rental Income
- Your property rental income does not count toward income limits unless real estate is your main source of income.
- Inheritances
- An inheritance does not require you to count it as earned income and affects your Social Security benefits. State tax rules determine what percentage of your inheritance becomes taxable based on how much money you receive.
- VA Benefits
- Your Social Security benefits remain unchanged if you earn income from veteran benefits.
- Royalties
- Your royalties won’t reduce your Social Security limit until you turn 67 years old.
- Unemployment
- You keep your Social Security benefits without changes when you receive unemployment benefits before reaching your retirement age. You should look at your state’s specific guidelines.
- Wages
- Individual money earned does not require adjustment to the Social Security earnings restriction.
- Pension Plans
- Money that comes from pension plans stays tax-free with no impact on how much you earn during Social Security.
Conclusion
Social Security provides you with financial stability during old age and in times of need. You need to understand which types of income will affect your Social Security payments and which won’t. Taking benefits before your full retirement age has an earnings limit that applies.
Build your financial strategy before these benefits exceptions come into play to maintain uninterrupted Social Security payments.
FAQs
Q. Does rental income affect Social Security benefits?
A. No, rental income does not count against your Social Security benefits unless it’s part of your real estate job.
Q. Are dividends considered for Social Security earnings limits?
A. No, dividends from investments do not affect your Social Security benefits.
Q. Do VA benefits reduce Social Security payments?
A. No, veterans’ benefits do not impact your Social Security benefits.
Q. Are IRA withdrawals counted toward Social Security income limits?
A. No, money withdrawn from an IRA does not count against your earnings limit.
Q. Do unemployment benefits affect Social Security payments?
A. No, unemployment benefits generally do not reduce Social Security benefits before full retirement age.
