How Working Affects Your Social Security Benefits
The most common question we hear is, “Can I still receive my Social Security benefits if I go back to work?” The simple answer is yes, you can. However, the amount of money you can earn before it affects your benefit payment depends on your age. The Social Security Administration (SSA) uses a set of rules called the “retirement earnings test” to determine this.
It is important to know that this test only applies to you if you are working and receiving benefits before you reach your “full retirement age.” Once you reach that milestone, the earnings test no longer applies, and you can earn any amount of money without your benefits being reduced.
What is Full Retirement Age (FRA)?
Your Full Retirement Age, or FRA, is the age at which you are entitled to receive your full, unreduced Social Security retirement benefit. This age is not the same for everyone; it depends on the year you were born. For people born between 1943 and 1954, the FRA is 66. It gradually increases for those born after, reaching 67 for anyone born in 1960 or later.
You can start receiving Social Security benefits as early as age 62, but your monthly payment will be permanently reduced. Waiting until your FRA ensures you receive 100% of the benefit you have earned. Understanding your specific FRA is the first step in understanding how working in retirement will affect you.
The Retirement Earnings Test Explained
So, what is the retirement earnings test? It is an annual limit on how much you can earn from a job or self-employment while also collecting Social Security benefits before your full retirement age. If your earnings go over this limit, the SSA will temporarily withhold a portion of your benefits.
Let’s break down the rules. There are two different earning limits, and which one applies to you depends on how close you are to your FRA.
For those who are under their full retirement age for the entire year:
The SSA sets an annual earnings limit. For example, in 2024, this limit is $22,320. If you earn more than this amount from your job, the SSA will withhold $1 in benefits for every $2 you earn above the limit. It is important to remember this applies only to your earned income, like wages or net earnings from self-employment. It does not count income from pensions, investments, or other government benefits.
Let’s look at an example. Imagine your annual earnings limit is $22,320 and you take a part-time job where you earn $28,320 for the year. Your earnings are $6,000 over the limit ($28,320 – $22,320). The SSA would withhold $3,000 of your Social Security benefits for that year ($1 for every $2 over the limit).
For the year you reach your full retirement age:
A higher earnings limit applies during the year you will reach your FRA. For example, in 2024, that limit is $59,520. In this case, the SSA only counts the earnings you make in the months before you reach your FRA. The withholding is also more generous: the SSA withholds $1 in benefits for every $3 you earn above this higher limit. Once the month of your birthday arrives, the limit disappears completely for the rest of the year and forever after.
The Good News: Withheld Benefits Are Not Lost
This is the most important part to understand: money that is withheld because of the earnings test is not gone forever. When you reach your full retirement age, the SSA recalculates your benefit amount. They will give you credit for the months in which your benefits were withheld. This will result in a higher monthly benefit payment for the rest of your life.
Essentially, the SSA is delaying a portion of your benefits, not taking them away. This adjustment helps to make up for the payments you missed. The official rules on working while receiving benefits are on the Social Security Administration (SSA) website.
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