Social Security Earnings Test

The Social Security Earnings Test is a set of rules applied by the Social Security Administration (SSA) to determine how much of your Social Security benefits will be withheld if you have income from working while receiving benefits before reaching full retirement age (FRA). Here’s a breakdown of how it works:

Before Full Retirement Age (FRA)

1. Under Full Retirement Age:

1. • If you are under FRA for the entire year, there is an annual earnings limit. For 2024, the limit is $22,320.
   • For every $2 you earn above the limit, $1 is withheld from your benefits.

1. In the Year You Reach FRA:

1. • A different, higher earnings limit applies for the months before you reach FRA. For 2024, this limit is $59,520
   • For every $3 you earn above the limit, $1 is withheld from your benefits.

At Full Retirement Age and Beyond

• Once you reach FRA, there is no earnings limit, and your benefits are not reduced no matter how much you earn.

Example

• Suppose you are 64 (under FRA) and will earn $30,000 in 2024.
• The earnings limit is $22,320, so you exceed the limit by $7,680
• Your benefits will be reduced by $1 for every $2 over the limit: $7,680 / 2 = $3,840.
• Thus, $3,840 will be withheld from your Social Security benefits for that year.

Adjustment to Benefits

• The SSA recalculates your benefits at your FRA to account for the months in which your benefits were withheld due to excess earnings. This means that your monthly benefit amount may increase at that time.

Purpose

• The earnings test is intended to encourage people to continue working while also ensuring that Social Security benefits are only paid out to those who are genuinely retired or working less.

Planning

• Understanding the earnings test is important for planning your retirement income, as it helps you determine the best time to start receiving Social Security benefits and how much you can work without significantly affecting your benefit payments.