Employment Effects on Social Security Benefits
You can collect Social Security retirement benefits and work at the same time but depending on how old you are and how much you earn, some or all of your benefits could be temporarily withheld. Here is how it works.
SSA Earning Rules
Social Security allows someone that is under full retirement age and collecting benefits, to earn up to $21,240 in 2023 without jeopardizing any Social Security benefits. However, if they earn more than $21,240, they will lose $1 in benefits for every $2 over that amount.
Full retirement age is 66 for those born between 1943 and 1954 but rises in two-month increments every birth year to age 67 for those born in 1960 and later. You can find your full retirement age at SSA.gov/benefits/retirement/planner/ageincrease.html.
The rules on earnings are less stringent in the year you reach your full retirement age. If that happens in 2023, you can earn up to $56,520 from January to the month before your birthday with no penalty. But if you earn more than $56,520 during that time, you will lose $1 in benefits for every $3 over that limit. Once your birthday passes, and you reach full retirement age, you can earn any amount without your benefits being reduced at all.
Wages, bonuses, commissions, and vacation pay all count toward the income limits but pensions, annuities, investment earnings, interest, capital gains and government or military retirement benefits do not. To figure out how much your specific earnings will affect your potential benefits, see the Social Security Retirement Earnings Test Calculator at SSA.gov/OACT/COLA/RTeffect.html.
It is also important to know that if you do lose any portion of your Social Security benefits because of the earning limits, it is not lost forever. When you reach full retirement age, your benefits will be recalculated and include credit for what was withheld.
For more information on how working can affect your Social Security benefits see SSA.gov/benefits/retirement/planner/whileworking.html.
Be Mindful of Taxes Too
In addition to the Social Security rules, you should also take U.S. federal tax laws into account. Because working increases your income, it might make your Social Security benefits taxable.
If the sum of your adjusted gross income (AGI), nontaxable interest, and half of your Social Security benefits is between $25,000 and $34,000 for individuals ($32,000 and $44,000 for couples), a tax is imposed of up to 50% of your benefits. Above $34,000 ($44,000 for couples) of earned income, will cause the taxes to increase to 85%, which is the highest portion of Social Security that is taxable. About a third of all people who get Social Security must pay income taxes on their benefits.
For more information, call the IRS at 800-829-3676 and ask them to mail you a free copy of publication 915 "Social Security and Equivalent Railroad Retirement Benefits" or you can view it online at IRS.gov/pub/irs-pdf/p915.pdf.
In addition to the federal government, 12 states – Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont and West Virginia – tax Social Security benefits to some extent. If you live in one of these states, you will need to check with your state tax agency for details.
Savvy Living is written by Jim Miller, a regular contributor to the NBC Today Show and author of "The Savvy Living" book. Any links in this article are offered as a service and there is no endorsement of any product. These articles are offered as a helpful and informative service to our friends and may not always reflect this organization's official position on some topics. Jim invites you to send your senior questions to: Savvy Living, P.O. Box 5443, Norman, OK 73070.