How Much Can You Earn and Collect Social Security?

Working while receiving Social Security benefits can affect your payments. The Social Security Administration (SSA) has specific rules that determine if and how earnings affect benefit amounts. These rules are not universally applied, as the impact of working depends significantly on an individual’s age relative to their full retirement age. Understanding these regulations is important for effectively managing retirement income.

Earnings Limits Before Full Retirement Age

For individuals collecting Social Security benefits before reaching their full retirement age, an annual earnings limit is in place. For example, in 2024, the annual earnings limit is $22,320. If earnings exceed this amount, the Social Security Administration will reduce benefits.

For every $2 earned above the annual limit, $1 will be deducted from the Social Security benefits. For instance, if someone under full retirement age earns $24,320 in 2024, which is $2,000 over the limit, their benefits would be reduced by $1,000 ($2,000 divided by 2).

Consider a scenario where an individual receives $1,500 per month in Social Security benefits and earns $25,000 in 2024. Their earnings exceed the $22,320 limit by $2,680. The SSA would then deduct $1,340 from their annual benefits ($2,680 divided by 2). This reduction could be spread out over several months, resulting in lower monthly payments until the withheld amount is recovered.

These specific earnings limits apply throughout the entire year for those who remain under full retirement age.

The full retirement age, which varies based on an individual’s birth year, typically ranges from 66 to 67. For those born in 1960 or later, full retirement age is 67. The earnings test rules described here apply until the month an individual reaches their full retirement age, after which different rules apply.

Earnings Limits In the Year of Full Retirement Age

A distinct set of earnings limits applies only during the calendar year an individual reaches their full retirement age. A higher earnings limit is set for the months leading up to the individual’s full retirement age month.

For 2024, the earnings limit for the months before reaching full retirement age is $59,520. If earnings exceed this higher limit, benefits are reduced by $1 in benefits for every $3 earned over this specific limit.

For example, if an individual reaches full retirement age in August 2024 and earns $62,520 from January through July, they would have exceeded the $59,520 limit by $3,000. Their benefits would then be reduced by $1,000 ($3,000 divided by 3). This reduction only considers earnings accumulated prior to the month of reaching full retirement age.

Starting with the month an individual attains their full retirement age, the earnings limit no longer applies. From that point forward, earnings will not reduce Social Security benefits, regardless of the amount earned. This means an individual can work and earn any amount of income without affecting their Social Security payments once they reach that specific age.

Types of Income Subject to Limits and Reporting Requirements

Not all income sources are counted when determining if Social Security benefits will be reduced due to earnings limits. The Social Security Administration (SSA) specifically considers wages earned from employment and net earnings from self-employment. This includes salaries, hourly wages, bonuses, commissions, and any other compensation received for work performed.

Conversely, many other types of income do not count towards the earnings limit. These include pensions, annuities, investment income such as dividends, interest, and capital gains, as well as government retirement benefits and IRA withdrawals. Income from these sources will not cause a reduction in Social Security benefits, regardless of the amount. The distinction is based on whether the income is derived from active work or from passive investments and previously earned entitlements.

Reporting earnings to the Social Security Administration is a critical responsibility for beneficiaries. If estimated earnings change throughout the year, or if there’s a significant change in employment status, beneficiaries should inform the SSA promptly. This ensures that benefit payments are adjusted correctly and helps prevent overpayments, which would need to be repaid.

Beneficiaries can report their estimated earnings by contacting the SSA directly, either by phone or by visiting a local Social Security office. Many individuals can also report earnings and manage their information through their personal “my Social Security” online account. Maintaining accurate records of earnings, such as pay stubs, is always recommended to verify reported income if needed.

How Withheld Benefits Are Addressed

When Social Security benefits are reduced or withheld due to exceeding the earnings limits, those benefits are not permanently lost. The Social Security Administration maintains a record of any benefits that were withheld. This withholding is essentially a temporary adjustment to benefit payments.

Once an individual reaches their full retirement age, the Social Security Administration automatically recalculates their monthly benefit amount. This recalculation accounts for the months during which benefits were reduced or entirely withheld because of the earnings test. The withheld benefits are effectively “credited back” by increasing the future monthly payment.

The recalculation treats the period of withheld benefits as if the individual had claimed benefits later. For instance, if benefits were withheld for 12 months, the SSA might adjust the future monthly payment as if the individual had started receiving benefits a year later than their actual claim date. This typically results in a higher monthly benefit payment for the remainder of the individual’s life.

This adjustment ensures that beneficiaries eventually receive the full value of their earned benefits, even if some payments were initially reduced due to working. The intent is to provide long-term financial stability by restoring the benefit amount to reflect the individual’s full entitlement at full retirement age. This process offers reassurance that working while receiving early benefits does not result in a permanent forfeiture of Social Security funds.