Please ensure Javascript is enabled for purposes of website accessibility

Here Are the 2020 Social Security Earnings Test Limits

By Maurie Backman - Oct 26, 2019 at 9:18AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

You can earn more money in 2020 without having it impact your benefits.

The Social Security Administration allows seniors to work and receive Social Security benefits at the same time. But whether working will impact your benefits will depend on how old you are and how much you earn.

You're entitled to collect Social Security starting at age 62, but you won't get your full monthly benefit until you reach full retirement age, or FRA. Here's what that age looks like, depending on when you were born:

Year of Birth

Full Retirement Age

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 or later

67

DATA SOURCE: SOCIAL SECURITY ADMINISTRATION. 

Once you reach FRA, you can earn as much money as you'd like without having it impact your benefits. But if you work and collect benefits prior to FRA, you'll be subject to Social Security's earnings test.

The earnings test dictates how much money you're entitled to earn before your benefits are affected. And the good news is that the limits under this test are increasing going into 2020. This means that seniors who haven't reached FRA will be able to earn more money without cutting their benefits.

Social Security card among a pile of 20-dollar bills

IMAGE SOURCE: GETTY IMAGES.

2020's earnings test limits

The amount of money you can earn before losing benefits will depend on how old you are. If you're collecting Social Security but haven't yet reached FRA and won't be reaching FRA in 2020, then you can earn up to $18,240 next year without having benefits withheld. This represents a $600 increase from 2019's earnings test limit of $17,640.

Once your earnings exceed $18,240, you'll have $1 in benefits withheld for every $2 you make. That money isn't lost forever -- rather, whatever amount you have withheld will be added back into your benefits once you reach FRA. If you earn $20,240 in 2020 and you're 62 years old, you'll forgo $1,000 in benefits for being $2,000 above the earnings test limit -- but you'll get it back later on.

The rules work differently if you'll be reaching FRA in 2020. In that case, the earnings test limit is $48,600 next year, which is an increase of $1,680 from 2019's $46,920 limit. Once your earnings exceed $48,600 in 2020, you'll have $1 in benefits withheld for every $3 you make.

Is it worth it to file early if you're still working?

As mentioned above, any benefits you have withheld due to the earnings test will be reinstated once you reach FRA, so you're not losing that money permanently. But if you file for Social Security before reaching FRA, you will face a permanent reduction in those benefits (unless you undo that decision by withdrawing your benefits application within a year of filing and repay all of the money you collected in Social Security).

Specifically, your benefits will be reduced by 6.67% a year for the first three years you file ahead of FRA, and then by 5% a year for each year after that. This means that if you're looking at an FRA of 67 but you file at 62, your benefits will be reduced by 30%. If your FRA is 67 and you file at 64, you'll lose 20% of your benefits.

This specific reduction has nothing to do with the earnings test. It's a penalty for filing early and applies regardless of whether you work or not. Therefore, if you're able to continue working in the years leading up to FRA, it could pay to hold off on benefits until then.

If you file early while holding down a job that pays more than what the earnings test allows for, you'll not only face a lifelong reduction in benefits but also be subject to the above-mentioned withholding.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
356%
 
S&P 500 Returns
124%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.