Many people continue to work beyond retirement age, either by choice or out of necessity. If you are receiving Social Security, you need to be aware of how working can affect your benefit payments. The Social Security Administration (SSA) sets certain limits on how much you can earn in income if you are receiving Social Security retirement benefits. Earning income above these thresholds can cause a reduction in benefits and have tax consequences.
Whether it makes sense to work while claiming Social Security at the same time is a complicated assessment. It can depend on how much you earn and when you begin taking Social Security benefits.
Full Retirement Age
The SSA also defines full retirement age. At full retirement age (FRA), you are eligible for the full Social Security retirement benefit amount.
Your birth year dictates what your full retirement age is under SSA guidelines. Those born between 1943 and 1954 reach full retirement age at 66. If your year of birth is 1960 or later, your full retirement age is 67. Be sure to check out the full retirement age chart on the SSA website for additional information.
Note that lawmakers have proposed legislation to move the FRA up to age 70.
Social Security Retirement Income Limits and Calculations
If you work and are at full retirement age or older, you can earn as much as you want, and your benefits will not reduce. However, individuals may begin taking Social Security retirement benefits early, beginning at age 62. If you are younger than full retirement age, there is a limit to how much you can earn and still receive full benefits. If you earn more than $22,320 (in 2024), Social Security will deduct $1 from your benefits for each $2 you earn over the threshold.
In the year you reach full retirement age, you can earn up to $59,520 (in 2024) without having a reduction in benefits. However, if you exceed $59,520 in earnings, Social Security will deduct $1 from your benefits for every $3 you earn over the limit until the month you reach full retirement age. Once you reach full retirement age, your benefits will no longer see a reduction.
For example, if your monthly Social Security benefit is $800 and you earn less than $22,320, you will receive $9,600 in benefits for the year. However, if you earn $23,000 ($680 over the threshold), you will receive $9,260 in benefits ($9,600 minus one-half of $680).
Note that if your benefits are withheld, at least some of those benefits will be returned to you in the form of higher monthly benefits once you reach full retirement age. When you reach full retirement age, Social Security will recalculate your benefits to take into account the months in which your benefits were withheld. In addition, if your latest year of earnings turns out to be one of your highest years, Social Security will refigure your benefit based on the higher earnings and pay you any increase due.
The Tax Consequences of Combining Your Work Earnings and Social Security Benefits
Another way that working can affect Social Security is with regard to taxes. The SSA calculates combined income by adding one-half of your Social Security benefits to your other income. If your combined income is between $25,000 and $34,000 (or $32,000 and $44,000, if filing jointly), you may have to pay taxes on 50 percent of your benefits.
If your income is more than $34,000 (or $44,000 if filing jointly), then you may have to pay taxes on up to 85 percent of your benefits. Find more information on the taxation of Social Security benefits. (Keep in mind that the SSA does allow you to pay taxes on your benefits throughout the year.)
Work With an Elder Law Attorney
The rules regarding Social Security can seem daunting. If you have questions about strategies for collecting Social Security benefits, consult with a qualified elder law attorney. They can also offer assistance if you've received an overpayment. Find an elder law attorney near you today.
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