Social Security is commonly seen as a source of retirement income. It simply entails that you can work and take and take Social Security retirement benefits or survivor benefits at the same time.
If you do so before you reach full retirement age, though, Social Security may withhold part of your benefits.
You can collect Social Security benefits if you are still working and earning income.
However, if you earn more than a certain amount from your work and haven’t reached your full retirement age, your benefit will temporarily be smaller.
You however need credits to be able to earn efficiently.
How social security credits work
Qualifying for Social Security isn’t that difficult. For your working life, you need 40 credits to be eligible for benefits, which is equal to 10 years of full-time work.
In 2021, you get one credit for each $1,470 of earnings ($1,510 in 2022), up to a maximum of four credits per year.
Social Security calculates your benefit amount based on your earnings over the years, whether you were self-employed or worked for an employer.
The more money you earned, the more you paid into Social Security and the higher your future benefits up to certain limits.
The math is much more complicated than this sounds, but that’s basically how it works.
How much can you earn while receiving social security?
The amount of money you can earn while receiving social security depends on a lot of factors.
For instance, if you opt to work while receiving Social Security before your full retirement age, you will only be able to receive a certain level of income before your Social Security benefit is temporarily reduced.
Also, if you are 65 years old and will reach full retirement age in three years, if you receive $2,500 in Social Security benefits every month and have a job that pays $2,000 a month, you are over the income limit of $1,580 by $420 each month.
During a year, you will receive $24,000 from the job, which is $5,040 more than the annual earnings threshold of $18,960.
As a result, $1 out of every $2 above the threshold will be withheld. In this case, $210 will be withheld every month from your Social Security checks.
You can expect to receive $2,290 each month from Social Security. When you turn your full retirement age, your payments will be recalculated to give you credit for the withheld portion of your benefit.
However, the Social Security earnings limit is $1,580 per month or $18,960 per year in 2021 for someone age 65 or younger.
If you earn more than this amount, you can expect to have $1 withheld from your Social Security benefit for every $2 earned above the limit.
How much can I earn and still get benefits?
When you begin receiving Social Security retirement benefits, you are considered retired for our purposes.
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.
If you are younger than full retirement age and earn more than the yearly earnings limit, we may reduce your benefit amount.
If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit. For 2021, that limit is $18,960.
In the year you reach full retirement age, we deduct $1 in benefits for every $3 you earn above a different limit.
In 2021, this limit on your earnings is $50,520. We only count your earnings up to the month before you reach your full retirement age, not your earnings for the entire year.
If your earnings will be over the limit for the year and you will receive retirement benefits for part of the year, we have a special rule that applies to earnings for one year.
The special rule lets us pay a full Social Security check for any whole month we consider you retired, regardless of your yearly earnings.
Social security income limits
In October 2021, The Social Security Administration (SSA) reported that the estimated average monthly retirement benefit will be $1,657.5.
While that regular monthly income helps, it’s usually not enough to cover living expenses. That’s one reason many people are working longer.
If you work, the money you bring home can affect your Social Security benefits—but the specifics depend on your age and how much you earn.
Remember that, although your full retirement age might be 67, you can start receiving benefits at 62, even if you’re still working.
For the 2021 tax year, if you start benefits before full retirement age, you can only earn up to $18,960 ($19,560 for 2022) and still get your full benefits.
Once you earn more than the limit, Social Security deducts $1 from your benefits for every $2 you earn.
In the year you reach full retirement age, Social Security becomes more forgiving. If you earn more than $50,520 ($51,960 for 2022) it deducts $1 for every $3 you earn but only during the months before you reach full retirement age.
Once you reach full retirement age, you can earn any amount of money, and it won’t reduce your monthly benefits.
What happens to the money Social Security withholds?
The Social Security Administration calculates the appropriate amount that you’ll forfeit and then takes it out of your monthly benefits.
You’ll see entire monthly checks held back by the government to cover the withholding.
For example, if you normally get Social Security of $1,000 per month but you have to forfeit $4,000, then Social Security will hold back four months’ worth of checks.
As painful as it is to lose your benefits, there is some payback. If you lose a month’s worth of benefits, then Social Security treats you as if you retired a month later than you did.
Once you hit full retirement age, you’ll start getting larger monthly checks based on that later retirement date.
You might not get all your lost money back, but the bigger checks will gradually send some of it your way.
What income is included in your social security record?
Only earned income, your wages, or net income from self-employment is covered by Social Security.
If money was withheld from your wages for “Social Security” or “FICA,” your wages are covered by Social Security.
This means you are paying into the Social Security system that protects you for retirement, disability, survivors, and Medicare benefits.
Pension payments, annuities, and the interest or dividends from your savings and investments are not earnings for Social Security purposes.
You may need to pay income tax, but you do not pay Social Security taxes.
Frequently asked questions
Q. How much can I earn after I have reached retirement age?
Starting with the month you reach full retirement age, there is no limit on how much you can earn and still receive your benefits.
Is my social security benefit taxable?
A. If you are receiving Social Security benefits, you’ll want to keep in mind that any income from working, withdrawals from traditional IRAs or 401(k)s and dividends and interest on your investments can contribute to making part of your Social Security payments taxable.
Q. Can I work and collect social security benefits?
A. Yes, you can work and collect Social Security benefits at the same time. However, if you are younger than your full retirement age, part of your Social Security payments may be temporarily withheld if you earn too much. Once you turn your full retirement age, there is no penalty for working while collecting Social Security benefits, and your payment will be increased to give you credit for benefits that were withheld in the past.
What is the maximum amount you can earn from Social Security in 2022?
The current maximum would mean nearly $47,000 a year and this is set to increase in 2022 thanks to the COLA adjustments.
What if I stop working in the middle of the year?
There’s a special rule for when you work part of the year but then retire. Regardless of your total earnings, you’re still entitled to get Social Security checks for any month in which you’ve officially retired.
At what age can you earn unlimited income on social security?
You can earn any amount and not be affected by the Social Security earnings test once you reach full retirement age, or FRA, which is 66 and 2 months if you were born in 1955 and will gradually increase to 67 for people born in 1960 and later.
You should know that your monthly Social Security payments may be subject to federal, state and local income taxes.
If you are collecting both benefits and work income, you may want to increase your withholding to avoid a big tax bill.
If your Social Security payments are reduced because you earned income above the limit, spouses and children receiving benefits on your work record will have their payments reduced as well.
This guide serves as the best way you can earn while on social security.