Income Limits for Social Security Benefits
Social Security retirement benefits are intended to make it possible for people to stop working during their golden years to spend time with family, pursue hobbies, and enjoy the fruits of their labors. Some retirees will find themselves back in the workforce, however. Whether financial necessity, a compelling opportunity, or a desire to be active and useful brought someone back to work, they will need to consider the income limits that could render them ineligible to collect Social Security benefits.
Whether you have reached full retirement age impacts the amount you are permitted to work while claiming Social Security benefits. Individuals may claim full benefits, regardless of how much they work, beginning the month they reach full retirement age. Before reaching full retirement age, however, the following limitations apply:
- If you are under full retirement age the Social Security Administration (SSA) will deduct $1 from benefits payments for every $2 earned above the annual limit. The 2017 annual limit is $16,920.
- In the year you reach full retirement age the SSA will deduct $1 from benefits payments for every $3 earned in the months before you reach full retirement age above a second limit. This limit was $44,880 in 2017.
The limits are subject to change and tend to increase annually on par with the national average wage index.
What is Earned Income?
The key to determining whether you are approaching your income limits for Social Security benefits involves calculating your total earned income. Earned income includes:
- Wages, salaries, tips, and other taxable employee pay; and
- Net earnings from self-employment.
Some forms of income are not included as earned income. Examples of these exceptions include:
- Interest and dividend earnings; and
- Government or military retirement benefits.
Calculating your total earned income will help you determine whether you have triggered the income limits for the receipt of Social Security benefits.
The Good News
Fortunately, it isn't all bad news. You will continue to pay social security taxes on your earnings and these additional earnings may ultimately increase your monthly benefit.
Also, the benefits withheld while you continue to work are not "lost." Once you reach the normal retirement age your monthly benefits are permanently increased to account for the months in which the benefits were withheld.
The SSA also offers some tools that can help you avoid losing benefits, including an online Retirement Earnings Test Calculator to help determine whether your employment might trigger Social Security income limits. Based on the information you provide this tool also calculates your estimated monthly benefit, taking into account potential penalties.
Learn More About Social Security, Retirement, and Survivors Benefits
A happy, healthy, and successful retirement involves making a number of very carefully considered decisions. Your retirement is the product of careful planning and it would be a shame to make critical decisions without accessing every resource this late in the game. Consider contacting a Social Security lawyer for a professional opinion.