How Much Can You Work Without Affecting Social Security

June 29, 2022 — More than a few retirees on Social Security turn down work that they would like to do. The concern is that their benefits will be reduced, thus making the effort not worthwhile. To help people understand how work might affect your Social Security benefits, here are the facts to help you decide the best course of action. But the good news first – over the long term, working has no negative impact on your benefits, and might even help.

Reached Full Retirement Age – no problem!

If you have reached your Full Retirement Age (FRA) – 66 if you were born in 1954 or before, gradually reaching 67 for those born in 1960 or later – there is no impact. You can work and earn as much as you want and it will not affect your Social Security benefit in any way.

Haven’t reached Full Retirement Age Yet?

For those who are receiving Social Security benefits but have not yet reached your FRA, there is still no limit on how much you can earn. But, depending on how much you earn, you may find some of your benefits reduced. How much that reduction might be depends on how close you are to your FRA.

In 2022, if you’re under full retirement age, the annual earnings limit without any penalty is $19,560. If you will reach full retirement age in 2022, the limit on your earnings for the months before full retirement age is $51,960.

If you are under full retirement age for the entire year, the SSA will deduct $1 from your benefit payments for every $2 you earn above the annual limit. For 2022, that limit is $19,560.

In the year you reach full retirement age, SSA deducts $1 in benefits for every $3 you earn above the 2022 limit of $51,960. They only count your earnings up to the month before you reach your full retirement age, not your earnings for the entire year.

How Much Can You Work Without Affecting Social Security

Starting with the month you reach full retirement age, there is no limit on how much you can earn without a benefit reduction.

Let’s look at a few examples (this data is from the Social Security website and your earnings might be different). You are receiving Social Security retirement benefits every month in 2022 and you:

• Are under full retirement age all year. You are entitled to $800 a month in benefits. ($9,600 for the year)You work and earn $29,560 ($10,000 over the $19,560 limit) during the year. Your Social Security benefits would be reduced by $5,000 ($1 for every $2 you earned over the limit). You would receive $4,600 of your $9,600 in benefits for the year. ($9,600 – $5,000 = $4,600)
• Reach full retirement age in August 2022. You are entitled to $800 per month in benefits. ($9,600 for the year)You work and earn $63,000 during the year, with $52,638 of it in the 7 months from January through July. ($678.00 over the $51,960 limit)
  • Your Social Security benefits would be reduced through July by $226 ($1 for every $3 you earned over the limit). You would still receive $5,374 out of your $5,600 benefits for the first 7 months. ($5,600 – $226 = $5,374)
  • Beginning in August 2022, when you reach full retirement age, you would receive your full benefit ($800 per month), no matter how much you earn.

Note that pensions and investment income is not included in the limit.

But you will probably get these reductions back!

What most people do not consider in their retirement planning is that at your FRA the SSA recalculates your Social Security monthly benefit. At that point they will credit you for any Social Security benefit payments withheld due to earnings over the limit. You won’t get a lump sum, but is spread out over time as a higher benefit. And, just as important, those extra earning years could help to increase the 35 year earnings record that is the basis of your benefit level.

For further reading:

Myth: It Doesn’t Pay to Work After You Claim Social Security

Comments? How much can you work without affecting Social Security? Have you ever turned down work because you were afraid it might cost you SS benefits? Did you know that any benefit reduction will eventually be returned to you? Please share your thoughts in the Comment section below.