Social Security

Earned Income

If you are 62 years old in 2010, you will reach full retirement age at 66. Under 2010 SSA guidelines, people who have not yet reached full retirement age can earn only $14,160 per year without incurring a penalty. For every $2.00 over the limit, $1.00 is withheld from benefits. There is an exception for the first year of early retirement, though (in this case, age 62).

In the first year, there is no limit on the amount of income you can earn prior to the month you retire. You will not be penalized for pre-retirement income. For the remainder of the year, you will receive a full benefit check for each month in which you earn $1,180 or less (one-twelfth of $14,160).

If you earn more than the maximum allowed, the Social Security Administration will withhold your monthly benefit check beginning in January of the following year until the overage is completely offset.

Unearned Income

There is no limit on passive (unearned) income you can receive from other sources, such as pension, annuities, capital gains, dividends, gifts, etc. There is also no limit to the amount of income other family or household members may earn. None of this money affects your retirement benefits, regardless of your age.

Full retirement age is the age at which a person may first become entitled to full or unreduced retirement benefits. No matter what your full retirement age (also called "normal retirement age") is, you may start receiving benefits as early as age 62 or as late as age 70.

You can retire at any time between age 62 and full retirement age. However, if you start benefits early, your benefits are reduced a fraction of a percent for each month before your full retirement age. No mater how much or little you make, you don't get full benefits at 62.

With that said, once you exceed a certain threshold, the benefits you can receive before full retirement age may be further reduced based on your earnings If you are under full retirement age for the entire year, they deduct $1 from you benefit payments for every $2 you earn above the annual limit; for 2016, that limit is $15,720.

The year you reach full retirement age, they deduct $1 in benefits for every $3 you earn above a different limit, but they only count earnings before the month you reach your full retirement age.

If you will reached full retirement age in 2016, the limit on your earnings for the months before full retirement age was $41,880.

Starting with the month you reach full retirement age, you can get your benefits with no limit on your earnings.

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FICA is NOT calculated on Gross Wages. It is done on FICA taxable wages which includes and exludes different things than Gross. FICA contributions, including various sub (categories of things like SS, Disability, Health, etc) are 15.30% of FICA wages. What is considered FICA wages differ from other wage considerations in many ways, (it has a top limit of about 108K, how pension contributions factored, State taxes, premium pay, etc. may be included or not, differently than what is considered taxable income for example).

If you are an employee, the employer MUST pay half of the contribution. If your self - employed, the amount normally paid by the employer is collected through something called the "self employment tax" when you file your income tax return.

Whether or not you are able to work while collecting Disability insurance benefits will be entirely dependent on the definition of total disability (description of the circumstances in which you are eligible for a claim), in your insurance contract. These are the most common variations available on today's market.

You will be considered totally disabled if, due to injury or sickness, you are unable to perform the material and substantial duties of your occupation, even if you are gainfully employed in another occupation.

Modified Own-Occupation Definition of Total Disability

You will be considered totally disabled if, due to injury or sickness, you are unable to perform the material and substantial duties of your regular occupation and are not gainfully employed elsewhere.

You will be considered totally disabled if, due to injury or sickness, you are unable to perform any occupation for which you are reasonably fitted by your education and experience; and are not gainfully employed.

*Every insurance company will have a separate version of these definitions. These descriptions should be used to help understand the differences, but not as any form of guarantee.

The easiest way to separate the different definitions is by knowing whether you have your own individual coverage, group coverage offered at work or are simply relying on Social Security benefits.

Traditionally, True-Own occupation Disability insurance will only be available in a personally owned policy. Occasionally companies will use a True or Modified Own occupation definition for the first 24-60 months of a contract, but then change to an Any-occupation definition. Again, you need to check the guidelines of your policy in order to know what your policy offers you.

Group coverage will often have a True or Modified Own-Occupation definition of disability for the first 24-36 months of a claim and then turn to an Any-Occupation definition. Talk with your Human Resource department or office manager to learn more about what your group coverage offers. If that person does not know, you should either have them call the company that provides your coverage, or call yourself and ask for policy information.

Social Security disability insurance uses an Any-Occupation definition of disability, at best. In order to qualify for Social Security benefits, you must be unable to perform any occupation and there also must be a strong indication that your claim will continue for multiple year at the least.

To summarize, you may be able to obtain benefits while working if you have an individual or group policy that provides a True Own-Occupation definition of Total disability. With Social Security benefits you are not able to do so.