Maximizing Your Income: Working While Collecting Social Security

 

Financial Planning: Working While Collecting Social Security

If you're earning income from a job while collecting Social Security, your earnings will face the retirement earnings test, constraining your job income. This measure restricts your potential earnings while ensuring continued Social Security benefits. Understanding these regulations is crucial for financial planning.

What You Need to Know: Collecting Social Security When Under Full Retirement Age

Depending on your age, Social Security will withhold part or all of your benefits if your wages exceed a certain amount. For those under full retirement age (FRA - currently between 66 and 67), Social Security temporarily withholds by reducing $1 of benefits for each $2 earned over the annual limit. For those between full retirement age and age 69, Social Security will reduce $1 of benefits for each $3 earned over a higher limit. 

Full Retirement Age (FRA) rule: no longer applies if you’re 70 

Once you reach age 70, this test no longer applies, and you can earn as much as you can without any reduction of benefits.  (Source: Social Security Administration)

2024 Earnings Limit

"In 2024, the earnings limit for most Social Security recipients under full retirement age is $22,320 (up from $21,240 in 2023). Work income up to that level is exempt, but you lose $1 in benefits for every $2 in earnings over the cap. 

Suppose you have a part-time job that pays $40,000 a year. Your benefits for 2024 would be reduced by $8,840 — half the difference between $22,320 and $40,000."   (Quoted from AARP)

What Earnings Count?

"Only earnings from work count toward the limit. “They don't count things like pensions, annuities, investment income or any bank interest,” Rosa says. This includes rental income, inheritances, distributions from retirement accounts or other forms of “unearned” income." "The Social Security Administration (SSA) does count some forms of work-related income that aren’t from a salary or hourly wage, including bonuses, commissions, consulting fees, severance pay, and unused vacation or sick days." 

"Over time, Social Security repays the money withheld under the earnings limit, starting when you reach FRA."

(Quoted from AARP)

 

Photo: D. McCallister.  Mona Loa, Big Island, Hawaii.


RESOURCES THAT MIGHT BE HELPFUL...

7 Things to Know About Working While Getting Social Security. If you claim benefits early, income from work can reduce your monthly payments.  Deirdre van Dyk,   AARP.  7 Things to Know About Work and Getting Social Security (aarp.org)

Exempt Amounts Under The Earnings Test.  Social Security Administration. Exempt Amounts Under the Earnings Test (ssa.gov)

How Work Affects Your Benefits.  Social Security Administration.  EN-05-10069.pdf (ssa.gov)  


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