Earn Over $24,480 While Collecting Social Security and the SSA Starts Withholding Your Checks
Working in retirement feels like a smart move until Social Security starts withholding your checks. Before you accept that part-time gig, there are earnings rules that could quietly drain your monthly benefits.
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You’ll often hear that working during retirement is a good thing. After all, it’s a chance to not only boost your paycheck, but have a reason to get out of bed in the morning.
A good number of retirees struggle with feelings of loneliness and depression. And if you had a rewarding career, it can be hard to go from working at full speed to suddenly not working at all.
So even if you don’t have a pressing need for extra money, holding down a job in retirement could still serve you well by structuring your weeks, keeping you moving, and giving you a chance to interact with other people.
If you’re collecting Social Security benefits, you should know that you’re absolutely allowed to have a job. But you may be subject to an earnings test, depending on your age. And in some cases, earning too much money could result in having Social Security withheld.
How Social Security’s earnings test works
Social Security’s earnings test only applies to recipients who have not reached full retirement age (FRA), which is 67 for those born in 1960 or later. If you’ve hit your FRA and are getting benefits, it doesn’t matter how much income you earn from a job. You could make $250,000 a year and you’d still get to keep your Social Security benefits in full.
But if you haven’t reached FRA, you’ll be subject to Social Security’s earnings test. This year, the earnings limit for people who won’t reach FRA by December 31 is $24,480. If your wages exceed that sum, you’ll have $1 in Social Security withheld per $2 of earnings.
What this actually means, though, is that if you earn a larger wage, you could potentially have your entire Social Security check withheld. So before you make plans to get a job, it’s important to crunch the numbers and see what it might mean for your Social Security checks.
That said, Social Security benefits that are withheld for exceeding the earnings test limit are given back eventually. Once FRA arrives, the Social Security Administration will recalculate your benefits and repay the money it withheld in the form of larger checks.
But if you’re counting on getting your benefits in full on top of your wages, you’ll need to understand exactly how much money you can earn from a job before you risk having Social Security withheld. And keep in mind that the limit changes every year. Thankfully, it usually changes for the better, since it typically increases with wage growth.
It pays to know the rules
Social Security’s earnings test is only one of many complicated rules associated with the program. If you’re gearing up to claim Social Security, it’s important to familiarize yourself with these nuances before you begin collecting benefits.
In fact, even if you’re not close to retirement age, it pays to read up on how Social Security works so you understand what options you have. Educating yourself could help you formulate a more solid retirement plan ahead of time.
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Maurie Backman has more than a decade of experience writing about financial topics, including retirement, investing, Social Security, and real estate. Her work has appeared on sites that include The Motley Fool, USA Today, U.S. News & World Report, and Kiplinger.
Prior to becoming a full-time financial writer, Maurie worked in the financial industry trading distressed debt. She then changed course and spent a few years designing electronic toys. After a stint in content marketing and UX, she shifted back into writing and has since covered everything from the housing market to estate planning to Medicare.
When she's not busy writing, Maurie can be found hiking, walking her dogs, driving her kids to their various sports practices and games, and curling up with a good book. She cooks on occasion and bakes way too often.
