Deciding to take Social Security benefits early can be a practical choice for many retirees, but it comes with potential challenges. One major consideration is the earned income penalty, which could reduce your benefits if you’re still earning income over a certain threshold. But there is a flaw in the Social Security system that sometimes incorrectly assesses the earned income penalty.   When someone retires, oftentimes their income for the year is already above the $23,400 earned income threshold but very few retirees realize that if their social security benefit is not turned on until after they receive their final paycheck, the earned income penalty will not apply even though social security may attempt to assess the penalty anyways.

The good news? With proper planning and documentation, such as holding onto your final paystub, you can avoid unnecessary penalties and protect your benefits.