How Work Influences Social Security Payment

Jason Anderson
November 20, 2024

Suppose you have not reached the full retirement age (FRA) and are earning above a certain income limit, known as the retirement earnings test exempt amount. In that case, the Social Security Administration (SSA) will withhold some of your benefits.

Below is a detailed explanation of how the retirement earning test operates and affects your Social Security payments.

Social Security will withhold a little from your benefits payments if you earn a higher income based on age. Social Security Administration (SSA) can stop or reduce your Social Security payouts if you have not reached the full retirement age (FRA), are learning above the defined income limit, or have started claiming benefits. You should know that your FRA depends on your birth year.

If you were born in 1960 and turning 62 this year or later, your full retirement age (FRA) will be 67, and if you are born between 1955 and 1960, your full retirement age (FRA) will be 66 and some months. The number of months after 66 years will depend on the year you were born. It would help to consider the year you were born when determining the full retirement age (FRA).

Your Social Security payment will be reduced if you currently receive benefits while working and have not attained the full retirement age (FRA). In this case, Social Security may withhold $1 forever extra $2 you earn above the earnings limit. The monthly and yearly earnings limits in 2022 are $1,630 and $18,960, respectively.

However, if you work for six months and retire after this working period, your benefits payments after retirement will not be affected by the earning limit. The monthly earning limit is only applicable to part-time work after you start receiving benefits.

If you reach the FRA in 2022, your earnings limit will be $51,960, and Social Security will withhold $1 for every additional $3 you earn above the earnings limit. Social Security reduction only applies to months you worked before reaching the FRA if you are working in your FRA year.

If you have reached your FRA, the monthly or yearly earnings limit is no longer applicable, and you can receive the full benefits while earning any amount.

Most workers don’t know the correct definition of earnings, which is your earned income subject to self-employment and payroll taxes. If your income comes from an investment, it will not be included in the earning limit estimation. Disability and Pension payment income will not be included. Therefore, earned income is what you receive from the service you offer.

The earnings limit applies to widows and widowers receiving survival or spousal benefits if they have not reached the full retirement age (FRA). The full retirement age (FRA) for widows and widowers is 66 years. Once they reach 66 years, they can receive the entire survivor benefits without reduction because the earnings limit no longer applies.

While considering the work’s effect on your Social Security payment, knowing the difference between benefits taxation and the earnings rule is essential. You should note that about 85% of the dollar amount you receive from Social Security benefits is liable to income taxes. Income taxes are determined using a formula, and the total taxable amount will be based on your benefit income and another income source ratio.

The earning limit is another distinct rule that doesn’t influence how Social Security taxes your benefits. The earning rule no longer applies after reaching the full retirement age (FRA), but income taxes may apply for life on any benefit you receive.

Jason Anderson

For over 13 years, Jason Anderson has served as a Personal Financial Advisor, Estate and Retirement Planner, helping to educate individuals from all walks of life and income levels on wise money investment and planning for a comfortable lifestyle and retirement.

Over time, Jason Anderson has become the 'Go-To' leading authority on personal financial advising, financial planning, and analysis, as well as retirement planning and financial planning for SMALL BUSINESS OWNERS. He also provides HIGHLY Popular financial education seminars for groups. These financial seminars empower people to more effectively budget, plan, manage their money, and achieve their personal financial goals. As a result of the excellent results, praise, and feedback that their financial seminars have received, the City of Los Angeles, The AFL-CIO union groups, as well as several other organizations, have decided to partner with Jason to more effectively accomplish their mission. He was also honored to be showcased in the November 2014 issue of Forbes Magazine "Americas Financial Leaders" and has been dubbed by the media as 'The Financial Educator.'

Jason is passionate about the work he does because it brings him joy to help his financial planning and advising clients reach their financial goals. He finds excitement in assisting families in saving and paying for their children's college education without stress, thanks to the financial plans he designs for them. He also takes pride in witnessing clients reach retirement and enjoy it precisely the way they desire.

Personally, Jason finds joy in being a husband and father of two wonderful children. In his spare time, he enjoys traveling, sports, hiking, and reading.

He works with Employees, Business Professionals, Business Owners, and 'High Net Worth' People.

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Disclosure: All annuity and life insurance products are designed to supplement securities as part of an overall plan. The recommendation of annuities and life insurance is not designed to eliminate the need for securities in any way.