How Much Income Can You Make While Collecting Social Security?

Social Security is a program designed to provide financial protection to millions of Americans, offering retirement, disability, and survivor benefits. For those considering or already receiving retirement benefits, understanding how earning income can impact these payments is an important aspect of financial planning. The rules surrounding earned income and Social Security benefits vary depending on an individual’s age relative to their Full Retirement Age (FRA).

Income Limits Before Full Retirement Age

Individuals who begin collecting Social Security retirement benefits before reaching their Full Retirement Age (FRA) are subject to specific annual earnings limits. Full Retirement Age is determined by birth year, ranging from 66 to 67. For beneficiaries who are younger than their FRA for the entire year, the Social Security Administration (SSA) sets an earnings limit. For 2024, this annual earnings limit is $22,320.

If a beneficiary earns more than this amount, their Social Security benefits will be reduced. The reduction rate is $1 in benefits for every $2 earned above the annual limit. For example, if someone earns $24,320 in 2024, which is $2,000 over the limit, their benefits would be reduced by $1,000 ($2,000 / 2).

This reduction in benefits is not a permanent loss. The withheld amounts are factored into a recalculation of benefits once the individual reaches their Full Retirement Age. This adjustment aims to restore the value of the benefits over the individual’s remaining lifespan.

These earnings limits apply only to income earned from working, such as wages or net earnings from self-employment. Other types of income do not affect Social Security benefits. The earnings limits are subject to annual adjustments by the Social Security Administration.

Income Limits in the Year You Reach Full Retirement Age

A distinct set of rules applies to individuals in the calendar year they reach their Full Retirement Age. The earnings limit is significantly higher for this specific period compared to the limit for those entirely pre-FRA. For 2024, the earnings limit in the year you reach FRA is $59,520. The reduction rate for exceeding this limit is also different; benefits are reduced by $1 for every $3 earned above the threshold.

This higher earnings limit applies only to income earned before the month an individual officially reaches their Full Retirement Age. For instance, if someone’s FRA is in August, only their earnings from January through July count towards this limit. Once the individual reaches their FRA month, the earnings limit no longer applies for the remainder of that year or any subsequent years. For example, if someone earns $60,520 by the time they reach their FRA month in 2024, exceeding the limit by $1,000, their benefits would be reduced by $333.33 ($1,000 / 3).

Income After Full Retirement Age

Once an individual attains their Full Retirement Age (FRA), the rules regarding earned income and Social Security benefits become much simpler. At this point, there are no longer any earnings limits imposed by the Social Security Administration.

This policy recognizes that once a person has reached their FRA, they are considered to be fully retired, regardless of whether they choose to continue working. Any benefits that may have been withheld prior to reaching FRA, due to exceeding the earnings limits, are not permanently lost. Instead, the SSA recalculates the monthly benefit amount to account for these previously withheld benefits, resulting in higher monthly payments going forward. The freedom to earn without penalty after FRA provides flexibility for individuals who wish to supplement their retirement income or continue working for personal reasons.

What Counts as Earnings

For the purpose of Social Security’s income limits, the Social Security Administration (SSA) defines “earnings” specifically. This typically includes income derived from active work. The primary components are wages received from an employer, which encompasses gross earnings before any deductions, and net earnings from self-employment.

Other forms of compensation that count as earnings include bonuses, commissions, and vacation pay. These are all considered earned income because they are directly tied to an individual’s work activity. The SSA tracks these types of income to determine if they exceed the set limits for beneficiaries below Full Retirement Age.

Conversely, many other types of income do not count against these Social Security earnings limits. This list includes, but is not limited to, pensions, annuities, and investment income such as interest, dividends, and capital gains. Rental income is also generally excluded, unless it is generated from a business activity where the individual materially participates. Furthermore, government benefits, such as veterans’ benefits, and withdrawals from retirement accounts like 401(k)s or IRAs, are not considered earned income for these purposes. This distinction between earned income (from work) and unearned income is fundamental to how the Social Security Administration applies its earnings tests.