How Much Money Can You Make at 62 and Still Draw Social Security?
Navigate the complexities of earning income while receiving early Social Security benefits. Discover key rules affecting your payments.
Understanding how work income interacts with Social Security benefits is a common consideration for individuals approaching retirement. Many people begin receiving Social Security benefits before their Full Retirement Age (FRA) while still working. While permissible, specific earnings rules can influence the amount of benefits received. The Social Security Administration (SSA) has established guidelines to manage this interplay, which are important for financial planning.
Understanding the Annual Earnings Limit
Individuals who receive Social Security benefits before reaching their Full Retirement Age (FRA) are subject to an annual earnings limit. For 2024, this limit is $22,320. If earnings exceed this amount, the Social Security Administration (SSA) will reduce benefits by $1 for every $2 earned over the limit. This reduction applies to retirement, spousal, and survivor benefits. The earnings limit is adjusted annually based on the national average wage index.
Only specific types of income count toward this annual earnings limit. This includes gross wages from employment and net earnings from self-employment. Bonuses, commissions, and vacation pay are also considered countable earnings. Many other income sources do not affect the earnings limit, including pensions, annuities, investment income, capital gains, and government benefits like veterans’ benefits.
Special Rules for the First Year of Retirement
A distinct rule applies during an individual’s first year of receiving Social Security benefits, especially for those who start mid-year. This “monthly earnings limit” allows beneficiaries to receive full benefits for any month their earnings fall below a specific threshold, regardless of their total annual earnings for that year. For 2024, this monthly limit is $1,860 for individuals under their Full Retirement Age. This provision helps those who retire partway through the year by preventing pre-retirement earnings from causing a benefit reduction.
This rule differs from the standard annual earnings limit because it evaluates earnings monthly, not solely on an annual total. For instance, if a person retires in October and their earnings for October, November, and December are below the monthly limit, they can receive full benefits for those months, even if earlier earnings exceeded the annual limit. This monthly test applies only in the initial year of benefit receipt, after which the standard annual earnings limit takes effect.
How Earnings Affect Your Benefits
When an individual’s earnings exceed the annual limit while receiving Social Security benefits before their Full Retirement Age, the Social Security Administration (SSA) will withhold benefit payments. The amount withheld is determined by the reduction formula, such as $1 for every $2 earned over the limit. These withheld benefits are not permanently forfeited; instead, they are credited by the SSA.
Once a beneficiary reaches their Full Retirement Age (FRA), the SSA recalculates their monthly benefit amount. This recalculation accounts for benefits withheld due to the earnings test. The adjustment increases the individual’s monthly benefit for their remaining lifespan, compensating for earlier reductions. The earnings test stops completely the month a person reaches their FRA, allowing them to earn any amount without further benefit reductions.
Reporting Earnings to Social Security
Accurately and timely reporting earnings to the Social Security Administration (SSA) is important for managing Social Security benefits while working. Individuals should inform the SSA whenever they start or stop working, or if their earnings change. This proactive reporting helps prevent overpayments, which can lead to future benefit deductions or repayment obligations.
The SSA provides several methods for reporting earnings. Beneficiaries can report wages online through their “my Social Security” account, by phone, by mail, or in person at a local Social Security office. When reporting, provide estimated earnings for the current year and actual earnings from previous years if reconciliation is needed. Keeping records like pay stubs and receipts for any reports made is recommended for future verification.