Retirement

How the Rules Work for You

July 12, 2018 • By

Retirement doesn’t have the same meaning for everyone. Some people plan to retire and never work again. Some people plan for second careers in occupations that wouldn’t have adequately supported their families, but they do the work for pure enjoyment. Some people, whether by design or desire, choose to work part-time or seasonally to supplement their retirement income.

Retirees (or survivors) who choose to receive Social Security benefits before they reach full retirement age (FRA) and continue to work have an earnings limit. In 2017, the annual earnings limit was $16,920 for those under FRA the entire calendar year. In 2018, it is $17,040. If you earn over the limit, we deduct $1 from your Social Security monthly benefit payment for every $2 you earn above the annual limit. 

In the calendar year you reach FRA, which you can check out on our website, you have a higher earnings limit. Additionally, we will only count earnings for the months prior to FRA. In 2017, the limit was $44,880. In 2018, it is $45,360. In the year of FRA attainment, Social Security deducts $1 in benefits for every $3 you earn above the limit.

There is a special rule that usually only applies in your first year of receiving retirement benefits. If you earn more than the annual earnings limit, you may still receive a full Social Security payment for each month you earn less than a monthly limit. In 2018, the monthly limit is $1,420 for those who are below FRA the entire calendar year. The 2018 monthly limit increases to $3,780 in the year of FRA attainment.

Once you reach FRA, you no longer have an earnings limit, and we may recalculate your benefit to credit you for any months we withheld your benefits due to excess earnings. This is because your monthly benefit amount is calculated based on a reduction for each month you receive it before your FRA. So, if you originally filed for benefits 12 months before your FRA, but earned over the limit and had two months of Social Security benefits withheld, we will adjust your ongoing monthly benefit amount to reflect that you received 10 months of benefits before your FRA, and not 12.

Most people understand that if they work while receiving benefits before FRA, their benefit may be reduced. What most people do not consider in their retirement planning is that we recalculate your Social Security monthly benefit at FRA to credit you for Social Security benefit payments withheld due to earnings over the limit. Explaining the earnings limit is another way that Social Security helps secure your today and tomorrow. Understanding both the earnings limit and the possible recalculation of your ongoing Social Security benefits will provide an additional perspective on retirement for you to consider.


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Jim Borland, Acting Deputy Commissioner for Communications

Jim Borland, Acting Deputy Commissioner for Communications

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  1. Danny sullivan

    i retired in Jan.2020. @ 64.years old. However i didn’t start my social security until my birth month in march. When I retired ,I received my final pay check. 8 weeks vacation pay and severence pay. All this money was earned and recieved prior to my start date of social security. ( vacation pay earned in 2019)Will this money count toward the maximum earnings before a penalty sets in of 1$ for every 2$ earmed?

    Reply
    • Vonda

      Hi Danny, thanks for using our blog. If you are under full retirement age for the entire year, then we deduct $1 from benefit payments for every $2 earned above the annual limit. For 2021, that limit is $18,960. There is a special earnings limit rule for those that retire mid-year and have already earned more than the yearly earnings limit. The special rule lets us pay a Social Security check for any whole month your earnings are $1,580 or less and you did not perform substantial services in self-employment, regardless of your yearly earnings.

      If you worked for wages, income received after retirement counts as a special payment if the last task you did to earn the payment was completed before you stopped working. Some special payments to employees include bonuses, accumulated vacation or sick pay, severance pay, back pay, standby pay, sales commissions, and retirement payments. Check out our factsheet Special Payments After Retirement for more details.

      The Getting Benefits While Working web page provides more details.

      You may also find our Retirement Earnings Test Calculator helpful.

      Reply
  2. Carol Platt

    My husband retires March 15 2021and I am on SSDI. what happens with filing taxes, are there limitation on what you file

    Reply
  3. Wanda Eben

    I am trying to be proactive. I will reach FRA in November 2022. Does the special earnings monthly rule only apply in the first year of retirement if you are going to make over the yearly earnings limit? I will not go over the yearly earnings limit before I reach FRA but will go over their monthly limit. What happens if I want to file for retirement next January? Do I lose out of collecting SS early because I will be over the monthly limit but not the yearly limit?

    Reply
  4. Gus B Shelton III

    I am receiving SS Benefits currently and have been since 2015 I think. I won a full time job in August of 2020. I expect my earning this year, 2021, to be approx. $60K. Will this have any effect of my SS Benefits/

    Reply
    • Vonda

      Hi Gus, thanks for using our blog. You can get Social Security retirement or survivors benefits and work at the same time. However, there is a limit to how much you can earn and still receive full benefits. The amount you’re allowed to earn while receiving benefits depends on your age. If you attain full retirement age in 2021, the earnings limit is $50,520 but we only count earnings before the month you reach full retirement age. Beginning with the month you reach full retirement age, earnings no longer reduce your benefits, no matter how much you earn. If you’re under full retirement age for the entire year, then we deduct $1 from benefit payments for every $2 earned above the annual limit. For 2021, that limit is $18,960.

      Visit our Receiving Benefits While Working web page for more details.

      Reply
  5. Ms Jones

    I am planning to start collecting Social Security in April, 2021 at 65 + 4 yrs old. I currently make 80k annually.
    Will my first year of Social Security be less than regular payments if I will earn more than the limit between Jan and March?

    Reply
    • Vonda

      Hi Ms Jones, thanks for using our blog. If you are under full retirement age for the entire year, then we deduct $1 from benefit payments for every $2 earned above the annual limit. For 2021, that limit is $18,960. There is a special earnings limit rule for those that retire mid-year and have already earned more than the yearly earnings limit. The special rule lets us pay a Social Security check for any whole month your earnings are $1,580 or less and you did not perform substantial services in self-employment, regardless of your yearly earnings.

      The Getting Benefits While Working web page provides more details.

      You may also find our Retirement Earnings Test Calculator helpful.

      Reply
  6. D. Lancaster

    Hi Vonda,
    Will filing joint tax returns effect my social security benefits? I plan to start receiving my SSI around July 30th (age 62 & 4mths) and no earned income thereafter. My wife will start her SSI benefit in Oct of 2021 (62). Within the this 4 month gap, my wife will receive a lump sum pension. We will not have any other earned after lump sum. Thanks for your help.

    Reply
    • Vonda

      Hi D Lancaster, thanks for using our blog. Some Social Security beneficiaries have to pay federal (not state) income taxes on their Social Security benefits. This usually happens only if they have other substantial income in addition to their benefits (such as wages, self-employment, interest, dividends and other taxable income that must be reported on the federal tax return).

      For information about taxation of benefits, visit our Income Taxes And Your Social Security Benefits web page. We hope this is helpful!

      Reply
  7. rosemarie

    I am 63 years and 6 months old. i will start receiving my SSA benefits on march 10 2021. I am part of an lawsuit which will pay me a lump sum pay out which is taxes of gross 25000 dollars being paid in July 2021. How will this affect my SSA benefits.

    Reply
    • Vonda

      Thank you for the question, Rosemarie. When we figure out how much to deduct from your benefits, we count only the wages you make from your job or your net profit if you’re self-employed. We include bonuses, commissions, and vacation pay. We don’t count pensions, annuities, investment income, interest, veterans, or other government or military retirement benefits.

      After you retire, you may receive payments for work you did before you started getting Social Security benefits. Usually, those payments will not affect your Social Security benefit if they are for work done before you retired. Check out our factsheet Special Payments After Retirement for more details.

      Reply
  8. RIC WEBB

    After reaching FRA, and when will the money deducted for excess earnings … $1 for every $2 earned be refunded. Will it be refunded. I had two years of excess earnings deducted. I reached FRA in 2020. Yet, I have seen no refund for the $1 deducted for $2 I earned over the earnings limit. Will I? Must I forget about it?

    Reply
    • Vonda

      Hi Ric, thanks for using our blog. When you reach full retirement age, we will recalculate your benefit amount to leave out the months when we reduced or withheld benefits due to your excess earnings. In addition, each year we review your work record. If your earnings for the prior year are higher than one of the years we used to compute your retirement benefit, we will recalculate your benefit amount. We pay the increase retroactive to January the year after you earned the month. We hope this helps!

      Reply
  9. Debbie Wilson

    I will be 66 this month, March2021,I applied for benefits almost 2 years ago. I have been told I make to much to receive benefits. I have heard nothing as to when I can expect to start receiving benefits.
    When should I expect to hear from SS Administration as to my benefits.

    Reply

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