Can you work and collect Social Security at the same time? The short answer is "yes, it's possible," but it depends on your age and how much you earn.
The Social Security earnings test sets annual earnings thresholds, above which certain workers' retirement benefits can be reduced or completely withheld. Here's what you need to know about the earnings test -- and if it could affect you in 2017 or 2018.
What is the Social Security earnings test?
In a nutshell, the Social Security earnings test sets limits to the amount of money individuals who have not yet reached full retirement age can earn while simultaneously collecting a Social Security retirement benefit.
If a beneficiary earns more than the earnings test threshold for their age, their Social Security benefits can be reduced or even eliminated.
For the purposes of the Social Security earnings test, American seniors are grouped into three categories:
- The first category includes seniors who have reached the eligibility age (62) for Social Security retirement benefits, but who will attain full retirement age after the current calendar year. This group is subject to the most restrictive earnings test limits.
- The second category includes seniors who have not yet reached full retirement age but will do so during the current year. This group faces a less restrictive earnings test in the months prior to their birthday month.
- The third category includes seniors who have already reached full retirement age. The earnings test does not apply to this group, meaning that seniors who have reached full retirement age can earn as much money as they'd like, with no effect on their Social Security benefits.
The 2017 and 2018 earnings test limits
If you fall into the first category -- that is, you won't reach full retirement age until after the current year -- you face the stricter form of the earnings test. Specifically, your first $16,920 of 2017 earnings and $17,040 of 2018 earnings are exempt, meaning that they have no effect on your benefits. On a monthly basis, this translates to $1,410 (in 2017) and $1,420 (in 2018). Beyond these thresholds, every $2 in excess earnings will reduce your benefits by $1.
If you're in the second category, the exempt earnings amounts are far more generous. In 2017, your first $44,880 in earnings ($3,740 per month) is exempt, and in 2018, this exemption rises to $45,360 ($3,780 per month). For every $3 in earnings above the corresponding threshold, your retirement benefits will be reduced by $1. Only the months before the month you'll reach full retirement age are considered.
Here's a chart for quick reference:
What it could mean for your benefits
Here's a quick example of how this works. Let's say that you're 64 years old and are entitled to a Social Security benefit of $1,200 per month in 2017. You work part-time and earn $24,000 per year, or $2,000 per month.
Since $2,000 is $590 more than the earnings test threshold, your monthly Social Security checks will be reduced by half of this excess, or $295. Instead of receiving a $1,200 monthly benefit, you'll get $905.
If your benefits are reduced, they aren't necessarily "lost"
As a final point, it's important to mention that if your benefits are reduced because of the earnings test, they don't exactly disappear. Rather, the withheld amount will be applied as a delayed retirement credit, which can permanently increase your retirement benefit once you reach full retirement age. Of course, there's no guarantee that you'll live long enough to recoup the withheld amount. However, the point is that your benefits aren't lost because of the earnings test -- just delayed.
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