According to the Congressional Research Service, about 1 in 3 American workers file early at age 62 for their Social Security and a growing number continue to work either part-time or full-time while collecting benefits. If this describes you it’s important to understand how the Social Security Earnings Test will affect your retirement income.
Filing At 62 Permanently Reduces Benefit
Filing early reduces your Social Security by a little over one-half of one percent for each month you receive your benefit before your Full Retirement Age (FRA). For example, if you were born in 1960, your FRA is 67 but, if you file early at age 62, your benefit is reduced by 30% for the rest of your life. The Social Security Administration offers online calculators to help you compare retirement benefit estimates for ages 62, your FRA, and age 70. To check your FRA, use this calculator.
2024 Social Security Earnings Test
If you collect Social Security at age 62 and continue to work, you’ll be subject to the Social Security Earnings Limit established by the IRS each year. For 2024, the earnings limit has been raised to $22,320. If you earn more than $22,320 in 2024 while collecting benefits, $1 will be withheld from your benefit for every $2 in earned income above the limit.
In The Year You Reach Your FRA, The Earnings Limit Is Higher
Social Security allows for a more generous earnings test in the year you reach your FRA. For those who will be turning their FRA in 2024 and continue working while collecting benefits, you can earn up to $59,520 without a reduction of your benefit. If you earn more than $59,520 in 2024, $1 will be withheld for every $3 in earned income above the limit for the months prior to turning your FRA.
“This means you can continue working and earn as much as you want without any reduction to your Social Security benefit.”
When The Earnings Test No Longer Applies
Once you reach your FRA, there’s no limit on your earnings and your benefit is recalculated to give you credit for the amount withheld. This means you can continue working and earn as much as you want without any reduction to your Social Security benefit. However, the reduction for filing early will continue to apply.
Deciding on when to file for Social Security benefits is a big decision especially if you plan to continue working in retirement. That’s why it’s important to understand how the Social Security Earnings Test can impact your benefit. To learn more, connect with an FRC® trained advisor.
