The rising cost of living and inflation are forcing many retirees to reconsider their financial plans. For some, Social Security retirement benefits alone may not cover all expenses, leading them to return to work.
While working during retirement can provide much-needed income, earnings above certain limits can reduce your Social Security payments—at least until you reach Full Retirement Age (FRA).
Here’s what you need to know about how earnings impact Social Security benefits, what counts as income, and how to report changes to the Social Security Administration (SSA).
Table of Contents
Earnings
The SSA defines earnings as wages you receive from employment or net earnings if you are self-employed. This includes:
- Wages from your job.
- Net earnings from self-employment.
- Bonuses, commissions, and vacation pay.
It’s crucial to include all these forms of income when calculating whether you exceed the earnings limit. The SSA provides a helpful tool called the Retirement Earnings Test Calculator to determine any potential benefit reductions.
Retirement Earnings Test
If you are under FRA and earning above the yearly limit, your Social Security benefits may be reduced. However, these reductions aren’t permanent; once you reach FRA, your benefits will be recalculated to account for the months your benefits were reduced due to excess earnings.
Not Count as Earnings
Not all sources of income are considered “earnings” by the SSA. For example, the following do not count toward the earnings limit:
- Pensions and annuities.
- Investment income.
- Interest from savings accounts or other financial assets.
- Veterans benefits.
- Government and military retirement benefits.
These exclusions mean you can draw from these sources without worrying about a reduction in your Social Security payments.
Reporting Changes
If you’re working while receiving Social Security benefits and are under FRA, it’s essential to report any changes in your earnings to the SSA. For instance, if your actual earnings differ from your original estimate, your benefits may need adjustment.
How to Report Earnings
To report changes in earnings:
- Call the SSA at 1-800-772-1213 (TTY 1-800-325-0778).
- Representatives are available from 8:00 a.m. to 7:00 p.m., Monday through Friday.
Failing to report changes in earnings promptly could lead to unexpected overpayments or underpayments, causing financial headaches later.
Increase Your Benefits
Interestingly, working while collecting Social Security benefits isn’t always a disadvantage. Your continued employment means you are paying Social Security taxes, which could increase your benefits. If your recent earnings are higher than those in your earlier career, the SSA will automatically recalculate your benefits annually to reflect this.
Earnings Limits
| Year | Earnings Limit (Under FRA) | Reduction Rate |
|---|---|---|
| 2024 | $21,240 | $1 withheld for every $2 over the limit |
| Year You Reach FRA | $56,520 (up to FRA month) | $1 withheld for every $3 over the limit |
Once you reach FRA, there is no limit on your earnings, and your benefits will no longer be reduced regardless of how much you earn.
FAQs
How much can I earn without reducing benefits?
In 2024, you can earn up to $21,240 if under Full Retirement Age.
Do pensions count toward the earnings limit?
No, pensions are not counted as earnings by the SSA.
What happens if I exceed the earnings limit?
Your benefits will be reduced temporarily until you reach Full Retirement Age.
Can working increase my Social Security benefits?
Yes, higher recent earnings can lead to a benefit recalculation.
How do I report changes in my earnings?
Call the SSA at 1-800-772-1213 to report changes in earnings.
