Social Security is a very important source of income for those who are retired or disabled. If you're receiving benefits, the last thing you want is to somehow jeopardize the money the Social Security Administration (SSA) is sending you.
Unfortunately, in some cases, working while receiving benefits can affect your monthly checks. If you are on disability, earning too much money could cause you to lose eligibility entirely. If you're getting retirement benefits, it's possible some of your checks could be withheld if your earnings exceed a certain level. However, this depends on your age -- and you do get the withheld funds back eventually in most cases, provided that you live long enough.
To help you better understand whether you can earn a paycheck without jeopardizing the income Social Security sends to you, check out this guide to how much you can earn without losing your benefits.
How much can you earn without losing Social Security retirement benefits?
The impact of work on your Social Security retirement benefits will vary depending on whether you have reached full retirement age (FRA).
FRA is the age at which you're entitled to claim full retirement benefits without a reduction due to filing early. Your FRA depends on your birth year, as the chart below shows. If you've already reached it, you can work as much as you want without affecting your benefits. If you're below it, you can do some work, but some of your benefits checks could be withheld if you earn too much.
|If You Were Born in
|Your FRA Is
|1937 or earlier
|65 and 2 months
|65 and 4 months
|65 and 6 months
|65 and 8 months
|65 and 10 months
|66 and 2 months
|66 and 4 months
|66 and 6 months
|66 and 8 months
|66 and 10 months
|1960 or later
The amount of income you can earn before your benefits are withheld will vary depending on whether you will reach FRA at some point in the year you're working.
Working in any years before you hit FRA
The earliest you can claim Social Security is 62, but if you were born in 1943 or later, the earliest you'll reach FRA is 66. This means you could both work and earn Social Security benefits for as long as four to five years before you reach the year you'll hit FRA. In any of these years, your benefits will be reduced by $1 for every $2 earned above a set income limit.
The amount you can earn without affecting benefits changes each year. For 2019, the limit is $17,640. This is the limit that applies to you if you will not hit FRA in 2019 but are working and receiving Social Security benefits at the same time during this year.
Let's take a look at how this could affect your benefits, assuming you were scheduled to receive $14,000 in total checks from Social Security in 2019 and that you will not hit FRA during the entirety of this year:
- If you work and earn $6,000 throughout the year, you have not hit the $17,640 annual earnings that would trigger withholding of some of your Social Security benefits. You will receive your full $14,000 in benefits.
- If you work and earn $35,000, you have exceeded the $17,640 limit by $17,360. You lose $1 for each $2 earned in excess of the limit, so you lose $8,680 of your annual benefits. Your annual income from Social Security will be reduced to $5,320 (from the total $14,000) because $8,680 of your benefits will be withheld.
- If you work and earn $80,000, you have exceeded the $17,640 limit by $62,360. Since benefits are reduced by $1 for each $2 earned over the limit, your benefits would have to be reduced by $31,180. This exceeds total annual benefits, so you won't receive any checks from Social Security.
If you have some money withheld from benefits due to working too much, you get credited for this and eventually get your money back -- provided you live long enough. We'll discuss how and when your withheld funds come back to you below.
Working in the year you hit FRA
If you hit FRA during the year you work, you can still have some of your Social Security benefits withheld if you exceed earnings limits prior to reaching full retirement age.
There's an income limit again, but it's much higher. And you have just $1 in benefits withheld for every $3 above the limit, not for every $2 above the limit.
For 2019, the income limit before benefits are affected is $46,920. So let's look at our same examples in which you're receiving $14,000 in annual Social Security income and you work during the year you hit FRA.
- If you work and earn $6,000 or $35,000, you haven't exceeded the $46,920 limit, so you won't have any of your benefits withheld.
- If you work and earn $80,000, you've exceeded the $46,920 limit by $33,080. Benefits are reduced by $1 for every $3 above the limit, so they are reduced by about $11,026.67. All but around $2,973 of your $14,000 Social Security benefit will be withheld.
- If you work and earn $100,000, you've exceeded the $46,920 limit by $53,080. This results in $17,693 being withheld, so you wouldn't get any benefits at all.
Working after you hit FRA
You can work as much as you want after you hit FRA. It doesn't matter if you make $6,000 or $600,000 -- you'll still get your full monthly Social Security retirement check.
What happens if some of your benefits are withheld?
The SSA does not account for the reduction in benefits by making each month's check smaller throughout the year. Instead, the SSA will not send any checks until the full amount has been withheld for the year. For the SSA to do this, you are expected to report your projected earnings ahead of time.
If you receive monthly benefits of $1,200 per month and you're supposed to have $5,800 withheld because of how much you're working, it would take about 4.8 months of having your full $1,200 benefit withheld to account for the $5,800. The SSA would round up to five months. For the first five months of the year, you won't receive benefit checks at all. Then you'd get your full $1,200 in benefits for the remaining seven months.
In this example, the SSA withheld $200 too much from you ($1,200 x 5 months = $6,000). You'd receive the extra $200 back in your check the next year.
When do you get back the withheld money?
The money withheld from your benefits because you worked before FRA does not disappear forever. You can eventually get it back provided you live long enough.
When you have some of your Social Security benefits withheld, the SSA will give you credit for those months and will recalculate your new higher monthly benefit once you hit FRA. Here's how this works:
- When you claim benefits before FRA, you're subject to an early filing penalty of 5/9 of 1% per month for each of the first 36 months you file prior to FRA. You're also subject to an additional 5/12 of 1% early filing penalty for each additional month prior to 36 months that you claim benefits before FRA.
- This penalty is applied to reduce your primary insurance amount, which is the standard benefit you'd receive at full retirement age (FRA). Your PIA is based on an average wage earned over the 35-years in your career when your inflation-adjusted income was highest (for more on this, see the Social Security benefits formula).
- When you hit FRA, if you filed early but your benefit check was withheld in some months due to earning too much, the SSA will eliminate the early filing penalty for these months. This causes an increase in your monthly checks.
Let's look at an example. Say your primary insurance amount at a full retirement age of 67 would be $1,400 per month -- but you claim benefits at 65. During the year when you're 65 and the year when you're 66, you work enough that your benefits check is withheld for the first five months of each year. In the year you turn 67, you don't have any benefits checks withheld at all.
- If you claim benefits at 65 instead of 67, that's two years or 24 months before FRA.
- You are subject to a penalty of 5/9 of 1% for each of the 24 months before FRA you claimed benefits. Your penalty equals ((5/9) x .01) x 24 = .133 or 13.3%.
- Your PIA of $1,400 would be reduced by 13.3%, so your monthly benefit starting at 65 would be around $1,214.
- Because you worked enough that your benefit was withheld for 10 months, the SSA will recalculate your monthly benefit when you hit FRA to give you credit for those 10 months. Instead of an early filing penalty being applied for 24 months, it will be applied only for 14 months.
- Your PIA will no longer be reduced by 13.3% due to early filing. Instead, it will be reduced by ((5/9) x .01) x 14 = .078 or 7.8%. Your new PIA would be about $1,291.
Since your PIA is adjusted upward by just $77 per month, it will take you awhile to make up for 10 months of having $1,400 benefits withheld ($1,400 x 10 months of missed benefits divided by $77 extra per month). In fact, it will take you just over 15 years to get back the benefits you didn't receive due to working while receiving Social Security income.
Working could sometimes raise your benefit
There's one other caveat to consider. Remember, your Social Security benefit is based on your highest 35 years of earnings. If you work after you start getting Social Security benefits and the salary you earn is higher than your income in some earlier years, you could replace a year of low earnings with a year of high earnings. This could raise the benefit you're entitled to.
Likewise, if you worked less than 35 years before claiming Social Security benefits, you could also increase your primary insurance amount by working longer. When you don't work a full 35 years, the SSA factors in years of $0s when determining your monthly benefits. You could eliminate some of these $0 wage years by working even after you begin receiving Social Security retirement checks.
This guide to how your work history affects Social Security benefits provides more insight into how working could increase your monthly income so you'll know if this applies to you.
How much can you earn without losing Social Security Disability Insurance (SSDI) benefits?
Social Security Disability Insurance is an earned benefit for which you become eligible if you work long enough to earn sufficient work credits prior to the time your disability stops you from working. You can learn more about SSDI benefits and eligibility in our guide, but the important thing to know here is that you can get SSDI benefits even if you have substantial assets and if your household income is high.
However, since SSDI is intended to support those who are too ill or injured to work, benefits can stop if you become able to earn income through work (rather than from other sources such as investments or gifts from family).
SSDI does want to encourage you to try returning to the workforce, though -- so your monthly benefits won't be affected right away if you start earning income. Instead, you have the opportunity to continue receiving your full SSDI checks during a trial work period. Here's how this works:
- You're allowed to work for up to nine cumulative months within any 60-month period while receiving full SSDI benefits. A month counts as one of your nine work months if earnings from work or net self-employment profit exceed a certain threshold ($880 in 2019) or if you work more than 80 hours per month at your own business. You can deduct business expenses and certain expenses associated with working while disabled in determining if you've cleared the income threshold.
- Once you've worked nine months in a rolling 60-month period, you'll continue to receive full SSDI benefits during any month over the following 36 months when you don't have substantial earnings. Substantial earnings are also defined as earning above a set income, which in 2019 is $1,220 (or $2,040 if you're blind).
If you're working while receiving SSDI benefits, you're also eligible for expedited reinstatement benefits within five years. If your condition worsens and you become unable to continue earning income from a job or self-employment, expedited reinstatement ensures you can request that your SSDI benefits restart without having to complete a full and lengthy disability application process again.
How much can you earn without losing Supplemental Security Income (SSI) benefits?
Supplemental Security Income, or SSI, also provides benefits to disabled individuals as well as to seniors over 65.
SSI is not an earned benefits program, unlike SSDI. Eligibility is not dependent on working and earning work credits as you pay Social Security taxes but instead is based on financial need. If you have a low household income and less than $2,000 in individual countable assets or $3,000 in countable assets as a couple, you can become eligible for these benefits.
Because SSI benefits are for lower-income recipients, you will lose access to these benefits if you have too much money coming in from any other sources. In fact, you can lose eligibility for SSI if you have earned income (such as income from work) or if you have unearned income including:
- Social Security retirement benefits
- Pension income
- Money from state disability programs
- Unemployment benefits
- Income from interest or dividends
You can also lose access to SSI if you have deemed income, which is income from other people who you live with or from the person who sponsored you if you are an alien. And if you get food or shelter for free, this is even considered a type of income, called in-kind income, that can affect access to benefits.
How much earned income can you have without losing SSI?
When you have earned income, you lose a portion of the monthly benefits you receive from SSI. Eventually, your earned income can grow so high that you lose your entire benefit. But not all earned income counts.
The SSA excludes certain income from counting when determining your earned income level. It excludes:
- The first $20 of all income earned (so if you only have earned income, this would come off your earned income total. But it could also come off unearned, deemed, or in-kind income, in which case it wouldn't reduce your earned income.)
- The first $65 of monthly earned income
- Income that is being used to pursue a plan of self-support by someone who is disabled or blind or income that is set aside for such a plan
- The first $30 of infrequent income per quarter
You are also able to deduct any work expenses related to impairment. And only one-half of your earned income counts in determining how much your benefits are reduced.
So, for example, say it's 2019 and you earn $1,627 per month in earned income with no other income sources.
- You'll subtract $85 from the $1,627 ($20 + $65), which will leave you with $1,542.
- Only half of this income counts, so you'd have $771 in earned income.
- For 2019, $771 happens to be the monthly maximum federal benefit -- called the federal benefit limit -- for an individual receiving SSI.
- In this example, your benefit is reduced to $0.
So, for 2019, you can earn up to $1,627 in earned income and get at least some SSI benefits. Once you hit the federal benefit limit, however, your SSI benefit ends.
How much unearned income can you have without losing SSI?
You'll also lose your benefits if you have too much unearned income. And all your unearned income counts, as opposed to just half your earned income.
This means you will lose your SSI benefits as soon as your unearned income hits $791 per month in 2019. You become ineligible with $791 in income -- rather than when you hit the federal benefits limit of $771 -- because of the rule allowing you to subtract the first $20 of income from any source.
How much deemed income or in-kind income can you have without losing SSI?
While the SSA considers both deemed and in-kind income in determining whether you remain eligible for SSI benefits, neither of these types of income are money you earn in a traditional sense.
Remember, deemed income is money your spouse earns (or money your parents earn if you're a disabled child under 18), while in-kind income is financial assistance that comes from friends and family, such as help paying rent.
Since these types of "income" aren't traditional earnings, we won't go into great detail in this guide about how much in-kind or deemed income you can have without losing Social Security benefits. The SSA will help you to determine if any income is being deemed to you and in what amount and will also provide advice on whether in-kind income affects your benefits. The main thing to remember is that you must report your spouse's income and any financial gifts or contributions you receive.
If you are concerned you will be subject to a reduction in benefits or a loss of benefits because of deemed income or in-kind income, the SSA has a multistep guide to determine the amount of deemed income that can be attributed to you, as well as a guide to in-kind income. The rules are complicated, though, so don't worry -- the SSA will help you understand how this type of financial help can affect your SSI checks.
Now you know how earnings affect Social Security benefits
Earning money will affect your Social security benefits in different ways depending on whether you are receiving Social Security retirement benefits, disability insurance benefits, or Supplemental Security income. Knowing the rules for your particular program will help you determine if it's a good idea to get a job and will help you plan for how any money you earn could affect the benefits you receive.