Question: I retired two years ago and started taking Social Security benefits at age 62. I'm 64 now, and I've just been offered a part-time job at my local library. How much can I earn before it lowers my Social Security benefits? Also, is there an age when my earnings stop affecting my benefits?
Answer: Your earnings from a job can only affect your Social Security benefits until you reach full retirement age, which is age 66 for people born from 1943 through 1954.
Because you won't reach your full retirement age this year, you can earn up to $16,920 in 2017 with no impact to your benefits (the cutoff generally increases by a few hundred dollars each year). If you earn more than that, the Social Security Administration will withhold $1 in benefits for every $2 you earn over the limit.
The cutoff is higher in the year you reach full retirement age. (See this table for the full retirement age by year of birth.) People who turn 66 in 2017, for example, can earn up to $44,880 until the month they reach full retirement age without affecting their Social Security benefits. The Social Security Administration will withhold $1 in benefits for every $3 in earnings above that level. Any money you make in the month you reach your full retirement age doesn't count toward the income test. And after reaching full retirement age, your paycheck won't affect your Social Security benefits at all.
You can use the Social Security Administration's Retirement Earnings Test Calculator to calculate how earnings will affect your benefits.
The money withheld isn't lost forever. Instead, your benefits will be recalculated at your full retirement age and increased to make up for the months when your benefits were withheld. (Your additional work could also help increase your benefits, if it ends up being one of your highest 35 years of earnings. As long as you're working, the Social Security Administration will check your record to see if the extra wages could increase your monthly benefit.)
For more information about the rules and examples, see SocialSecurity.gov's How Work Affects Your Benefits. Also see our story Silver Lining for the Social Security Earnings Test.
As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.
A Spotlight on the Mountain States: The Kiplinger Letter
The Kiplinger Letter Most Mountain states are seeing good job growth in multiple sectors from healthcare, energy, and semiconductor production to farming and government.
By David Payne Published
H-1B Work Visa Rules Get a Revamp
The Kiplinger Letter H-1B visas allow employers to hire high-skilled foreign workers. Regulators have finalized new rules for this visa program following last fall's proposal.
By Matthew Housiaux Published
No Need to Panic: Social Security Is NOT Running Out
social security Yes, Social Security is undergoing some changes, including a possible reduction in benefits in the not-too-distant future – but the checks won’t stop coming. Here’s why the program is changing and what to expect.
By Andrew Rosen, CFP®, CEP Published
5 Year-End Moves to Help Retirees Trim Their Tax Bill
taxes The end of the year is a great time to start thinking about next year's tax bill. Here are some strategies on how to reduce what you will owe Uncle Sam.
By Rocky Mengle Published
Worried About Higher Taxes in Retirement? Strategize Now.
Tax Breaks With the Tax Cuts and Jobs Act expiring after 2025, it’s a good time to be proactive about taxes. Here are some smart ideas to consider to put a lid on your tax bills in retirement.
By Emanuel Avina, Registered Investment Adviser Published
IRA Tax Planning: Minimizing the RMD Ticking Time Bomb
required minimum distributions (RMDs) Couples with a bit of an age difference have an interesting strategy available to them to reduce taxes on their retirement savings due to required minimum distributions.
By Michael Aloi, CFP® Published
How the Social Security Earnings Test May Affect Your Retirement
social security If you start taking Social Security benefits before your full retirement age and decide to continue working, you need to understand how the earnings test works.
By Austin Powell, CFP® Published
Waiting for Fixed Annuity Rates to Rise Doesn’t Pay
annuities If you like the guaranteed rates and tax deferral that fixed annuities offer, but you want to wait because you’re hoping rates will improve, think again. Here’s why keeping too much in cash while you wait puts you behind … and you may never catch up.
By Ken Nuss Published
Turned off by Low CD Rates? Consider a Fixed Annuity
annuities CD rates are under 1%, but comparable annuities can pay more than 2% to 3% guaranteed and tax-deferred.
By Ken Nuss Published
6 Tax Strategies for Retirement
retirement Taxes are one thing retirees tend to have a little control over, as long as they do some serious planning.
By Scot Landborg Published