Inflation has been driving up the cost of living for consumers of all ages. But seniors on Social Security may be having a harder time making ends meet. As such, a lot of older people have made the tough decision to return to work in some capacity.

The good news is that you are allowed to collect Social Security and also earn money from a job. And once you reach full retirement age (FRA), which is either 66, 67, or somewhere in between, depending on the year in which you were born, you can earn any amount of income without it impacting your Social Security benefits.

But if you're working and collecting Social Security simultaneously before reaching FRA, you'll risk having benefits withheld if your income exceeds what's known as the earnings-test limit. The good news, though, is that the limit is increasing in 2023, which means you'll get more leeway to bring home income from a job without worrying about losing out on Social Security.

A smiling person wearing an apron in a bakery.

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A look at next-year's earnings-test limits

This year, you can earn up to $19,560 without impacting your Social Security benefits. From there, you'll have $1 in Social Security withheld for every $2 you earn. Next year, the earnings-test limit is rising to $21,240, so you can bring in an extra $1,680 of income without being concerned about the impact on your Social Security.

Meanwhile, the earnings-test limit is much higher for those reaching FRA within the year. In 2022, for example, those who will reach FRA by Dec. 31 can earn up to $51,960 without impacting their Social Security benefits. In 2023, those reaching FRA can earn up to $56,520 without risking having benefits withheld. And from there, $1 in Social Security is withheld per $3 of earnings.

It's worth noting that withheld Social Security benefits aren't forfeited completely. They're simply held back and then added onto your benefits once you reach FRA.

However, claiming Social Security at any point prior to FRA means locking in a reduced benefit. If you're going to do that, you probably don't want to have some of that income withheld due to your higher earnings. As such, it's a good idea to pay attention to what the earnings-test limits look like from year to year.

An important change

Soaring inflation this year has spurred a number of key Social Security changes for 2023, including an 8.7% cost-of-living adjustment and a higher wage cap for Social Security tax purposes. But these aren't the only changes to come down the pike, so if you're collecting Social Security, it's important to keep tabs on how the program is shifting next year.

That said, the fact that seniors are getting the option to earn more money in 2023 without being taxed is a positive thing. Inflation is still sky-high, and we don't know when living costs will start to drop. Giving seniors more leeway to supplement their retirement income with job-based wages could spare a lot of people a world of financial stress.