The Social Security administration reduces your monthly retirement benefits if you earn more than a specified wage limit in any year before you reach full retirement age. Excess earnings can also affect Social Security disability benefits. Your gross wages as an employee and net earnings from self-employment count toward the allowances, but pensions and other unearned income do not.
Full Retirement Age
Once you reach full retirement age, high earnings won't reduce your Social Security retirement benefits. This age, also called your normal retirement age, is 66 for those born between 1943 and 1954 and rises in steps for those born from 1955 until 1959. People born in 1960 and later have a full retirement age of 67. The government considers you at full retirement age on the first day of your birthday month.
Before Full Retirement Age
As of 2012, you have an annual wage allowance of $14,640 if you are under full retirement age all year. You can earn this much during the year with no reduction in Social Security retirement benefits. You'll receive a $1 reduction in benefits for each $2 you earn beyond that limit. The Social Security earnings limits are subject to change.
Year of Full Retirement Age
As of 2012, you can earn up to $38,880 with no penalty in the months before you reach normal retirement age. This is a special wage allowance for the year when you reach full retirement age. Social Security reduces your benefit by $1 for every $3 you earn over that amount before your birthday month.
If you receive Social Security benefits for disability, you can earn any amount for nine months after qualifying for benefits. After this time, you can continue working and receive full disability benefits for any month in which you don't receive substantial earnings. The amount considered substantial earnings depends on the type of disability. For example, as of 2012, the government considers more than $1,690 net monthly income as substantial earnings for blind individuals, and more than $1,010 as substantial for people who are not blind. Calculate net income by subtracting work expenses related to the disability from gross income.
The Cost of Work
Social Security supplies an online calculator to help you estimate how much you'll lose by exceeding the wage allowances. Enter your birth date and other data to calculate the change in your benefit. Earned income may also cost you more in taxes. In general, if Social Security is your only income, you probably won't owe federal income taxes, according to the Internal Revenue Service. However, earned income may put you above the threshold for paying income taxes.
- Social Security: How Work Affects Social Security Retirement Payments
- Social Security: Retirement Planner -- Full Retirement Age
- Social Security: Working While Receiving Social Security Disability Benefits
- Social Security: Substantial Gainful Activity
- Social Security: How Work Affects Your Benefits -- What Counts as Income
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