How Much Can You Make and Still Collect Social Security?

For many individuals approaching or in retirement, Social Security benefits are a foundational element of their financial planning. A common question for those considering work during retirement is how earning an income might affect these benefits. Understanding the rules governing earned income while receiving Social Security is important to manage expectations and avoid unexpected reductions. This article clarifies the relationship between earned income and Social Security payments, explaining the specific earnings limits and how they apply in different circumstances.

The Social Security Earnings Limit: An Overview

The Social Security earnings limit is a rule designed to manage benefit payments for individuals who continue to work while receiving Social Security benefits, particularly before their full retirement age. Its primary purpose is to ensure that benefits are directed towards those who are fully retired or transitioning out of the workforce. The Social Security Administration (SSA) sets these annual limits, which are subject to change each year. You can find the most current figures directly on the official SSA website.

Not all income counts towards this earnings limit. The limit specifically applies to “earned income,” which primarily includes wages from a job or net earnings from self-employment. Income derived from passive sources, such as pensions, annuities, investment income, capital gains, or other government benefits, typically does not count against the Social Security earnings limit. Exceeding the applicable earnings limit can lead to a temporary reduction in Social Security benefits.

Working Before Your Full Retirement Age

For individuals who begin receiving Social Security benefits but have not yet reached their full retirement age (FRA), specific earnings limits apply. In 2024, if you are under your full retirement age for the entire year, you can earn up to $22,320 without any reduction in your benefits. Once your earnings exceed this annual limit, the Social Security Administration will withhold $1 in benefits for every $2 you earn over the limit.

For example, if a beneficiary under FRA earns $30,000 in 2024, their income is $7,680 over the $22,320 limit ($30,000 – $22,320 = $7,680). The SSA would then withhold $3,840 from their Social Security benefits ($7,680 / 2 = $3,840). This annual limit applies to earnings throughout the entire year. Beneficiaries should report their estimated earnings to the SSA to ensure accurate benefit payments and to prevent any potential overpayments. The withheld amount is spread out over the year, typically by reducing monthly payments until the full amount is recovered.

Earnings in Your Full Retirement Age Year

A different set of rules applies during the specific calendar year in which a beneficiary reaches their full retirement age (FRA). For 2024, a higher earnings limit of $59,520 is in place for earnings made before the month you attain your FRA. This means that earnings up to this amount prior to your FRA month will not result in benefit reductions. Once you reach your full retirement age month, the earnings limit no longer applies for the remaining months of that year, nor for any subsequent years.

The withholding rule for this period is also more lenient: the Social Security Administration will deduct $1 in benefits for every $3 earned over this higher limit. For instance, if a beneficiary turns FRA in July and earns $65,000 between January and June, they have exceeded the limit by $5,480 ($65,000 – $59,520). Their benefits would be reduced by $1,826.67 ($5,480 / 3). Any earnings from July onwards would not affect their benefits.

It is important to understand that only earnings accumulated up to the month before reaching FRA are counted against this limit. Beneficiaries should accurately report their earnings to the SSA to ensure their benefits are correctly calculated and paid.

Working After Full Retirement Age and Benefit Recalculation

Once a beneficiary reaches their full retirement age (FRA), the Social Security earnings limit no longer applies. This means that individuals who have reached their FRA can earn any amount of income from work without having their current Social Security benefits reduced. This provides flexibility for those who wish to continue working part-time or full-time without impacting their monthly Social Security payments.

A key aspect of working while receiving benefits, especially before FRA, is “benefit recalculation” or “adjustment for earnings.” The Social Security Administration automatically recomputes a beneficiary’s payment amount once they reach their FRA. This recalculation gives credit for any months in previous years where benefits were withheld due to exceeding the earnings limit. The withheld benefits are not permanently lost; instead, they are used to increase your future monthly benefit amount. This adjustment ensures that beneficiaries receive a higher monthly payment for the rest of their lives, effectively compensating for the earlier temporary reductions.