Trap No. 6: Limits on benefits while working
You are allowed to collect Social Security and earn wages from your employer. However, if your wages exceed $15,120 in 2013, your Social Security benefits will be reduced by $1 for every $2 you earn above that level, says Mark Spittell, senior director at Alvarez & Marsal Taxand.
During the year in which you reach full retirement age -- which ranges from age 65 to 67, depending on your birth year -- you can earn up to $40,080 before $1 of your Social Security benefits will be deducted for every $3 you earn above that threshold. However, the money isn't lost forever. You will be entitled to a credit, so your benefits will increase beginning the month you reach full retirement age.
At full retirement age, no income restrictions apply. "There is no penalty for additional income earned," says Gaito.
If you plan on working beyond age 62 and anticipate earning more than $15,120 per year, strongly consider putting off Social Security benefits.