The Social Security Earnings Limits for Early Retirement

With early retirement comes some restrictions on Social Security benefits.

Roll of dollars image by Mykola Velychko from

The Social Security system offers retirement benefits to workers who have paid into the system through payroll or self-employment taxes. Social Security sets the rules and guidelines for beneficiaries, who can begin drawing benefits as early as age 62. if you work while on early retirement, Social Security adjusts the benefit amount.

Full and Early Retirement Age

Full retirement age depends on your year of birth, and ranges from 65 to 67. The younger you are, the later Social Security sets your full retirement age. The age for early retirement -- 62 -- is the same for everyone.

No Earnings Limit

Social Security does not limit the amount of money you can earn at any time, whether you are on early or normal retirement. This includes wages from employment or earnings from non-wage sources, such as interest and dividends from investments. When you have reached full retirement age, you can earn wages without any effect on your retirement benefit, the amount of which depends on your lifetime earnings.

Early Retirement Earnings

If you earn wages before full retirement age, Social Security sets an annual dollar limit and then begins to deduct $1 from your benefit for every $2 you earn over the limit. In 2012, the limit was set at $14,640. Social Security pays its benefits monthly, so if you earn $14,640 through the first six months of the year, and then start making $1,000 a month, the retirement benefit in the seventh and following months will be reduced by $500. This continues until you reach the year when you turn full retirement age, at which point Social Security applies new guidelines.

Year of Full Retirement Age

The earnings limit for a full benefit is set higher in the year in which you reach full retirement age. For 2012, Social Security set the higher limit at $38,880. The deduction from your benefits in this year is at the rate of $1 for every $3 in earnings over the limit -- until that crucial birthday. In the month in which you reach full retirement age, Social Security will stop deducting from your retirement benefit if you are working.