If you have reached full retirement age, you can earn as much as you like, but if you are between sixty-two and full retirement age you can’t exceed the earnings limit. The earnings limit in 2017 was $16,920. If you and your spouse are drawing benefits on your own work records, then you can each earn up to $16,920 without losing any of your benefits. The earnings limit is adjusted for inflation every year, which means the limit typically increases a little every year.
The Social Security Administration withholds one dollar of your benefits for every two dollars you earn over the limit. In the year you reach full retirement age, your earnings threshold increases to $44,880 up to the month you reach full retirement age. If you exceed the earnings limit in this time period, the Social Security Administration will withhold one dollar for every three dollars from your benefits. When you reach your full retirement age, you can earn as much as you want and still draw your checks.
Wages and self-employment income are counted in the earnings limit. Income from dividend-paying stocks, and IRA and 401(k) withdrawals doesn’t impact the earnings limit. That means an excellent retirement planning strategy entails building up investment income sources that aren’t counted in the earnings limit. Doing so could allow you to take reduced benefits early and still enjoy good retirement cash flow. Incidentally, if you’re wondering how the SSA will know if you exceed the earnings limit, you should be aware that the IRS shares information with the SSA.
It’s also worth noting that earnings limits apply to each family member drawing on your work record. Benefits will be held back for each individual recipient if he or she exceeds the earnings limit. So, if you’re under sixty-two and receiving Social Security checks based on your spouse’s work record, you could lose benefits if you got a job that paid well.
Many retirees take Social Security at sixty-two and they work part-time or full-time jobs that pay at or just above the earnings limit. While we don’t recommend taking your benefits early, doing so can work in your favor. You can get income from your reduced retirement benefits and earn up to the earnings limit. The wages plus the retirement benefits can give you and your spouse a modest income while allowing you to retire early, or at least to go part-time. It also doesn’t matter much if you go a little over the earnings limit because the dollar amount of the benefits that will be taken back would be low.
However, if you know you’re going to earn a substantial amount over the earnings limit, we strongly recommend that you contact the Social Security Administration to adjust your payments, thereby avoiding overpayments in your benefits for that year. Let’s say you suddenly get a really great job, and you decide you want to go for it but are collecting reduced Social Security benefits because you took them early. The SSA will suspend your benefit payments. That can help boost the value of your reduced benefits when benefits are reinstated later. If you keep working until you’re seventy, you will benefit from delayed retirement credits as well.
Periodically obtain your Social Security statement from the Social Security Administration so you know what benefit amounts you are eligible to receive. The easiest way to go is to set up an account on the Social Security website (www.ssa.gov). The SSA has discontinued their automatic mailing of statements. It’s up to you to access your most recent statement prior to making any decisions about your benefits. The SSA website has a benefit calculator to help you understand your benefit projections.
Your projected retirement benefit amounts will change over time. The calculations you see on your statement reflect your current earnings history. You will see what you’ll get at sixty-two if you take early benefits, what you’ll get at full retirement age, and what you’ll receive if you wait until age seventy to start collecting your monthly check. If your income drops over time, those benefits will be lower. If your income increases over time, those benefits will be higher.
Many people make the mistake of thinking their benefits are static based on their most recent statement. If you don’t check your statement just before you plan to collect benefits, you may be in for an unpleasant surprise. You can apply for benefits online, but we recommend that you make an appointment at your local Social Security office to ask questions before you claim your benefits.