How much can one earn and still collect social security? This is a common question among individuals approaching retirement age, as they try to understand the financial implications of continuing to work while receiving social security benefits. The answer to this question is not straightforward, as it depends on several factors, including the individual’s age, earnings history, and the specific rules and regulations set forth by the Social Security Administration (SSA). In this article, we will explore the various aspects that determine how much one can earn while collecting social security benefits.
Firstly, it is important to note that the amount one can earn without affecting their social security benefits varies depending on the individual’s full retirement age (FRA). The FRA is the age at which a person is entitled to receive their full retirement benefits, and it is determined by the year of birth. For individuals born between 1943 and 1954, the FRA is between 65 and 67 years old. Those born in 1960 or later will have an FRA of 67.
For individuals under their FRA, the SSA imposes a limit on the amount of earnings they can earn each year without incurring a penalty. In 2023, this limit is $21,240. If an individual earns more than this amount, $1 will be deducted from their social security benefits for every $2 earned over the limit. This deduction is known as the earnings test.
However, once an individual reaches their FRA, the earnings limit is removed, and they can earn as much as they want without affecting their social security benefits. This means that individuals who choose to work after reaching their FRA can enjoy the financial benefits of both their earnings and their social security benefits.
It is also important to consider the fact that individuals who are still working and collecting social security benefits may be subject to income taxes on their benefits. The amount of tax depends on the individual’s total income, which includes earnings, interest, dividends, and other taxable income. For individuals who file a joint tax return, up to 85% of their social security benefits may be taxable, while for those filing singly, up to 50% of their benefits may be taxable.
In conclusion, the amount one can earn and still collect social security benefits is determined by their age, earnings history, and the specific rules set forth by the SSA. While there are limits on earnings before reaching the FRA, these limits are removed once an individual reaches their FRA. It is crucial for individuals approaching retirement age to understand these rules and regulations to make informed decisions about their financial future.
