How Much Money Can I Make While on Social Security?

Introduction

Social Security is an important source of income for many Americans who are retired or disabled. Although it is not intended to provide a full-time income, Social Security benefits can be a great help in making ends meet. But how much money can you really make while on Social Security?

In this article, we’ll explore the different ways that individuals can make money while receiving Social Security benefits. We’ll look at researching typical income levels, comparing other retirement sources, exploring investment opportunities, supplementing income, examining tax implications, and looking for ways to maximize benefits.

Researching Typical Social Security Income Levels

The first step in determining how much money you can make while on Social Security is to research typical income levels. The amount of money you receive from Social Security depends on a number of factors, including your age, work history, and marital status.

Average Amount of Social Security Benefits

According to the Social Security Administration (SSA), the average monthly benefit for retired workers was $1,503 in 2019. This figure does not include any additional benefits for spouses, children, or survivors. The maximum Social Security benefit for retirees in 2021 is $3,148 per month.

Calculating Your Expected Social Security Benefits

You can use the SSA’s Retirement Estimator tool to get an estimate of your expected Social Security benefits. This tool takes into account your earnings record and other factors to give you an idea of how much you can expect to receive in Social Security benefits.

Understanding How Social Security Benefits are Taxed

It’s also important to understand how Social Security benefits are taxed. Generally speaking, up to 85% of your Social Security benefits may be taxable if your total income exceeds certain thresholds. You should consult with a tax professional to determine your exact tax liability.

Comparing Social Security Benefits to Other Retirement Sources

In addition to Social Security, there are a number of other sources of retirement income available to people. These include 401(k)s and IRAs, pension plans, annuities, and more. Let’s take a closer look at each of these options.

401(k)s and IRAs

A 401(k) is a type of employer-sponsored retirement plan. Contributions to a 401(k) are made pre-tax, and the money grows tax-free until withdrawn. An IRA (Individual Retirement Account) is a type of personal retirement account. Contributions to an IRA are made after-tax, but the money grows tax-deferred until withdrawn.

Pension Plans

Pension plans are retirement plans sponsored by employers. They provide a guaranteed stream of income to retirees, typically based on their years of service and salary. Pension plans may be defined benefit plans, which provide a fixed benefit, or defined contribution plans, which allow employees to make contributions that grow over time.

Annuities

An annuity is a financial product that provides a guaranteed stream of income for a specified period of time. Annuities can be structured as immediate or deferred, depending on when payments begin. Immediate annuities start paying out right away, while deferred annuities don’t start paying until a later date.

Exploring Investment Opportunities Available With Social Security Funds

Once you have determined how much money you can expect to receive from Social Security, you can then explore various investment opportunities that are available with your Social Security funds. Here are some of the most popular investment options:

Investing in Stocks and Bonds

Stocks and bonds are two of the most common investments. Stocks represent ownership in a company, while bonds are loans given to companies or governments. Investing in stocks and bonds can be a great way to generate returns over the long term.

Mutual Funds

Mutual funds are collections of stocks and bonds managed by professional investors. By investing in mutual funds, you can gain exposure to a variety of different investments without having to buy them individually. Mutual funds carry fees and expenses, so it’s important to consider these costs before investing.

ETFs

Exchange-traded funds (ETFs) are similar to mutual funds in that they are collections of stocks and bonds. However, unlike mutual funds, ETFs are traded on stock exchanges and can be bought and sold throughout the day. ETFs can provide a low-cost way to invest in a diversified portfolio.

Real Estate Investing

Real estate investing can be a great way to generate passive income. You can buy rental properties or invest in real estate investment trusts (REITs). REITs are companies that own and manage real estate investments. Investing in real estate can be risky, so it’s important to do your research before taking the plunge.

Examining Ways to Supplement Social Security Income

If you find that your Social Security benefits alone aren’t enough to cover your expenses, there are a few ways you can supplement your income. Here are some ideas to consider:

Working Part-Time

One option is to find part-time employment. There are a number of jobs available for seniors, such as working in retail, hospitality, or home health care. Working part-time can provide extra income and give you something to do in your spare time.

Selling Products or Services Online

Another option is to sell products or services online. There are a number of websites and marketplaces where you can list items for sale. You can also offer services such as tutoring, consulting, or freelance writing. Selling products or services online can be a great way to make some extra money.

Starting a Small Business

Finally, you could consider starting a small business. A small business can provide additional income and give you the opportunity to pursue a passion or hobby. Consider what skills and resources you have, and what kind of business would best suit your needs.

Investigating Tax Implications of Social Security Receipts

Before you start investing your Social Security funds, it’s important to understand the tax implications. Depending on your income level and filing status, some or all of your Social Security benefits may be subject to federal, state, and local taxes.

Federal Taxes

Generally speaking, up to 85% of your Social Security benefits may be taxable if your total income exceeds certain thresholds. The thresholds vary depending on your filing status. Consult with a tax professional to determine your exact tax liability.

State Taxes

In addition to federal taxes, some states may also tax Social Security benefits. Currently, 13 states impose income taxes on Social Security benefits: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia.

Local Taxes

Finally, some local jurisdictions may also impose taxes on Social Security benefits. Check with your local tax authority to determine whether you are subject to any local taxes.

Looking at Ways to Maximize Social Security Benefits

In addition to understanding the tax implications, there are a few other ways to maximize your Social Security benefits. Here are a few ideas to consider:

Applying for Additional Benefits

The SSA provides a number of additional benefits for those who qualify. These include Supplemental Security Income (SSI), Special Veterans Benefits, and Social Security Disability Insurance (SSDI). If you think you may be eligible for any of these benefits, contact the SSA to learn more.

Considering Early Retirement

You may be able to increase your Social Security benefits by retiring earlier than normal. Depending on your age and work history, retiring earlier may result in higher benefits. Contact the SSA to learn more about the benefits of early retirement.

Taking Advantage of Cost of Living Adjustments

The SSA periodically adjusts Social Security benefits to account for inflation. Taking advantage of cost of living adjustments can help ensure that your benefits keep pace with rising costs.

Conclusion

Social Security can provide a valuable source of income for those who are retired or disabled. In this article, we’ve explored the various ways that individuals can make money while receiving Social Security benefits. We’ve looked at researching typical income levels, comparing other retirement sources, exploring investment opportunities, supplementing income, examining tax implications, and looking for ways to maximize benefits.

Even though Social Security benefits are typically modest, they can still provide a valuable source of income for those who need it. With careful planning and a bit of creativity, it is possible to make the most of your Social Security benefits.