Contrary to popular belief, working and receiving Social Security benefits are not mutually exclusive. You can indeed hold down a job while still collecting various forms of Social Security benefits, such as retirement benefits, spousal benefits, and survivor benefits. Let’s cut into how this works and what you need to keep in mind.
Table of Contents
Annual Review of Earnings
Every year, the Social Security Administration (SSA) reviews the earnings records of all beneficiaries who reported wages in the previous year. If your most recent year of earnings turns out to be one of your highest, your benefits may be recalculated. This recalibration will ensure you receive any increases owed, retroactive to January of the year after the earnings were made.
Earning Limits Before Full Retirement Age
When you start receiving Social Security retirement benefits, you are considered retired, but you can still work. However, there are limits on how much you can earn without affecting your benefits. If you are below full retirement age, earning above the annual limit can reduce your benefits.
Below Full Retirement Age
For individuals below full retirement age (between 62 and 67), $1 is deducted from your benefits for every $2 you earn above the annual limit. For 2024, this limit is set at $22,320.
Reaching Full Retirement Age
In the year you reach full retirement age (between 66 and 67, depending on your birth date), the earnings limit changes. For 2024, the limit is $59,520. For every $3 earned above this limit, $1 is deducted from your benefits. However, only earnings up to the month before you reach full retirement age are counted.
Age and Beyond
Once you hit full retirement age, any earnings no longer reduce your benefits, no matter how much you make. At this point, your benefit amount will be recalculated, and you will be credited for any months your benefits were reduced due to excess earnings. This ensures you eventually receive the full amount of your benefits.
Calculating Deductions
Knowing how deductions work is crucial. Let’s look at a couple of examples to clarify this process.
Example 1
Suppose you are receiving $800 per month in benefits for a total of $9,600 annually. If you earn $32,320 in 2024, you are $10,000 over the $22,320 limit. Therefore, your benefits would be reduced by $5,000 ($1 for every $2 over the limit), leaving you with $4,600 of your $9,600 benefits for the year.
Example 2
Imagine you reach full retirement age in August 2024. You earn $69,000 for the year, with $63,000 earned from January to July, exceeding the $59,520 limit by $3,480. Your benefits would be reduced by $1,160 ($1 for every $3 over the limit). You would receive $4,440 of your $5,600 benefits for the first seven months. Starting in August, when you reach full retirement age, you would receive your full $800 monthly benefit, regardless of your earnings.
What Counts as Earnings?
When calculating deductions from your benefits, only wages from employment or net earnings from self-employment are considered. This includes bonuses, commissions, and vacation pay. However, other forms of income such as pensions, annuities, investment income, interest, veterans’ benefits, or other government or military retirement benefits do not count towards your earnings and do not affect your Social Security benefits.
FAQs
Can I work and receive Social Security benefits simultaneously?
Yes, you can work while receiving Social Security benefits, but there are earnings limits to consider.
How does earning above the limit affect my Social Security benefits?
Earnings above the limit can reduce your benefits, depending on your age and the amount you earn.
What happens when I reach full retirement age?
Once you reach full retirement age, your earnings no longer reduce your benefits, and you may receive a recalculated benefit amount.
Are all types of income counted towards the earnings limit?
No, only wages and self-employment income count towards the earnings limit.
How often are my benefits recalculated based on my earnings?
The SSA reviews your earnings annually to determine if your benefits need to be recalculated for any potential increases.
