retirement

How Working in Retirement Affects Social Security Benefits

A paycheck can temporarily reduce Social Security payments if you're drawing benefits before your full retirement age.

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.

Only wages from a job or self-employment count in this calculation. Income from investments, pension benefits and money withdrawn from an IRA or 401(k) are excluded.

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.

Most Popular

13 States That Tax Social Security Benefits
social security

13 States That Tax Social Security Benefits

You may have dreamed of a tax-free retirement, but if you live in these 13 states, your Social Security benefits are subject to a state tax. That's on…
October 4, 2021
How Big of a Threat Does Inflation Pose to Your Retirement?
retirement

How Big of a Threat Does Inflation Pose to Your Retirement?

You might be surprised how much inflation can nibble away at your retirement nest egg over time if you aren’t prepared.
October 3, 2021
10 Best Stocks for Rising Interest Rates
stocks

10 Best Stocks for Rising Interest Rates

The 10-year Treasury yield is hovering near its highest level in months. Here are 10 of the best stocks to buy in a rising interest-rate environment.
September 30, 2021

Recommended

12 States That Won't Tax Your Retirement Income
Tax Breaks

12 States That Won't Tax Your Retirement Income

Retirees can save a lot of money in these states that completely exempt the most common types of retirement income – 401(k)s, IRAs and pensions – from…
October 19, 2021
14 States That Won't Tax Your Pension
Tax Breaks

14 States That Won't Tax Your Pension

Some states have pension exclusions with limitations based on age and/or income. But these states don't tax pension income at all, no matter how old y…
October 19, 2021
Taxes in Retirement: How All 50 States Tax Retirees
Tax Breaks

Taxes in Retirement: How All 50 States Tax Retirees

We rated every state, plus Washington, D.C., on how retirees are taxed. We considered taxes on Social Security and other retirement income, tax exempt…
October 19, 2021
10 Least Tax-Friendly States for Retirees
retirement

10 Least Tax-Friendly States for Retirees

When it comes to state and local taxes, retirees in these states are likely to pay more than retirees in other states.
October 14, 2021