What you need to know about working and receiving social security benefits
Social Security has some 2,700 rules, and one of the most confusing and misunderstood is the retirement earnings test (RET). Some people may think they can’t work — or shouldn’t work — while collecting Social Security benefits. But that’s not the case. However, it’s important to understand the RET and how it may affect your income.
Social Security and Working Facts
- The RET applies only if you are working and receiving Social Security benefits before reaching full retirement age (see below). Any earnings after reaching full retirement age do not affect your Social Security benefit.
- If you are under full retirement age for the entire year in which you work, $1 in benefits will be deducted for every $2 in gross wages or net self-employment income above the annual exempt amount ($18,960 in 2021). The RET does not apply to income from investments, pensions, or retirement accounts.
- A monthly limit applies during the year you file for benefits ($1,580 in 2021), unless you are self-employed and work more than 45 hours per month in your business (15 hours in a highly skilled business). For example, if you file for benefits starting in July, you could earn more than the annual limit from January to June and still receive full benefits if you do not earn more than the monthly limit from July through December.
- In the year you reach full retirement age, the reduction in benefits is $1 for every $3 earned above a higher annual exempt amount ($50,520 in 2021, or $4,210 per month if the monthly limit applies). Starting in the month you reach full retirement age, there is no limit on earnings or reduction in benefits.
Full Retirement Age
Birth year
1943–1954 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
1955 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 and 2 months
1956 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 and 4 months
1957 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 and 6 months
1958 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 and 8 months
1959 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 and 10 months
1960 and later . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Note: If you were born on the first of a month, the SSA calculates your benefit and full retirement age as if you were born in the previous month. If you were born on January 1, it calculates as if you were born in December of the previous year.
Additional Social Security and Working Facts
- The Social Security Administration (SSA) may withhold benefits as soon as it determines that your earnings are on track to surpass the exempt amount. The estimated amount will typically be deducted from your monthly benefit in full. For example, if your monthly benefit is $2,000 and the SSA determines that your benefits should be reduced by $6,000 for the year due to your earnings, three full monthly benefit payments may be withheld before you begin to receive benefits again.
- The RET applies to Social Security retirement benefits, spousal benefits, dependent benefits, and survivor benefits. Note that the RET may reduce a couple’s combined monthly benefit when
a spousal benefit — regardless of the spouse’s age — is based on the benefit of a worker who is subject to the RET.
In Closing
The RET might seem like a stiff penalty, but the deducted benefits are not really lost. Your Social Security benefit amount is recalculated after you reach full retirement age. For example, if you claimed benefits at age 62 and forfeited the equivalent of 12 months’ worth of benefits by the time you reached full retirement age, your benefit would be recalculated as if you had claimed it at 63 instead of 62. You would receive this higher benefit for the rest of your life, so you could end up receiving substantially more than the amount that was withheld. There is no adjustment for lost spousal benefits or for lost survivor benefits that are based on having a dependent child.
Additional Social Security Resources
Have questions? I’m here to help.
