When Social Security started, the money was for those who retired and were no longer working. Because the system was for those completely retired, those who continue working would receive less than full benefits. The Social Security earnings test determines if you will get full or reduced benefits.
People earning more than the limits do not lose their Social Security benefits, but the Social Security Administration (SSA) will withhold part of it until the recipient reaches full retirement age (FRA). Until then, the recipient receives reduced benefits by a percentage of any earned income above the limits.
Earning Limits for 2024
When you apply for Social Security benefits, there will be a Social Security earnings test. This test looks at your earnings and determines if you will receive all or part of your benefits at the time of your application. It looks at how much you earn each year before you reach FRA.In 2024, people receiving Social Security benefits have an earnings limit of $22,320 until the year they reach their FRA. Earnings above that limit cause a reduction in your benefits by $1 for every $2 earned above the limit.
During the year that they reach their FRA, they are allowed to earn a much higher income. The limit is $59,250 in 2024, which only applies until your birth month—when you reach your FRA. Earnings made above that limit—before the month of your FRA—will be reduced by $1 for every $3 above the limit.
People who earn amounts much higher than the income limits would likely be better off waiting until they reach their FRA before getting Social Security benefits. If your earnings are way over the limits, you may not receive any benefits before reaching your FRA.
No Earning Limit After Your FRA
Once you reach your FRA, there are no limits on how much you can earn. The sky is the limit if you choose to continue working, but it will affect the cost of Medicare. You will receive your full benefit amount each month after that time. The earnings test is only for those who have not yet reached their FRA.If you choose not to receive Social Security benefits before you reach your FRA, there are no reductions of your benefits after you apply. You can earn as much as you want after that time without a penalty.
The Monthly Benefits Earnings Test
The earnings test can also be applied based on your income for one month. Kiplinger says the SSA considers you retired in any month that you earn less than $1,860 in 2024 if you are less than your FRA for the entire year. If you are going to reach your FRA during 2024, the SSA considers you retired if you earn less than $4,960 in any month.
As an example of how it would work, a 62-year-old man wants to retire in July. He made $90,000 in January through June. After taking the annual earnings test, he would not receive any benefit. After retiring, if he earns less than $1,860 or less for the following months in that year, he would be entitled to full benefits based on the monthly earnings test.
Recalculating Your Benefits
After you reach your FRA, your Social Security benefit is recalculated. When money is withheld, most people will have it added to their monthly benefits. You will not get a lump-sum benefit for the withheld money. If your most recent income raises your income average, it is also reflected in the increased benefits.Income Not Counted
Once you reach the Social Security benefits age, you will report your income on your application forms. Fool says that you will not report some types of income on the Social Security earnings test. The test does not include investment income, annuities, pensions, veteran’s benefits, or any other income you get from the government.Any income you receive in the month that you reach your FRA is also not included in the earnings test. The SSA says that any income made after that is not considered in the test.
Retirement Earnings Test Calculator
If you want to know how much you will receive in benefits, the SSA has a retirement earnings test calculator. If you reach your full retirement age this year, you only need to enter your income up to the month you reach your FRA.Spouses and Survivors Receiving Benefits Because of Children
The rules are different if you are a spouse and a survivor and get benefits because you have minor children or if they have disabilities. The SSA says that if you had any benefits withheld because you were working, your retirement benefits will not be increased when you reach full retirement age.Social Security Benefits May Be Reduced in 2034
Unless Congress acts, all Social Security benefits will be reduced in 2034. The SSA expects a drop of about 17 percent. You will need to consider this if your Social Security retirement benefits will be your primary source of income once you retire.If you have not yet retired, you must know how much retirement income you will get from Social Security. Once you know, you can put that figure into your retirement planning. For further help, talk to an agent at the Social Security Administration.
The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
