How Working Affects Benefits


Social Security Administration

How Work Affects Your Benefits

SSA Publication No. 05-10069
January 1997

Introduction

If you receive Social Security retirement or survivors benefits and you're still working, you can earn a substantial amount of money while receiving some benefits. However, your benefits will be reduced if you earn over certain limits. This leaflet explains how this works, what counts as “earnings,” and how to report earnings to Social Security. It also explains a special rule that usually applies to the first year you start getting Social Security benefits.

Note: A different set of rules applies to people receiving Social Security disability benefits or Supplemental Security Income (SSI) payments. They should report all earnings to Social Security.

Also, a different set of rules applies to most work performed outside the United States. Contact Social Security if you are working (or plan to work) outside the U.S.

What Are The 1997 Earnings Limits?

If you are under 65, you can earn up to $8,640 with no reduction in your Social Security benefits. If you earn more than that, $1 in benefits is withheld for every $2 you earn over $8,640.

If you are 65 through 69, you can earn up to $13,500 with no reduction in your Social Security benefits. If you earn more than that, $1 in benefits is withheld for every $3 you earn over $13,500.

If you're 70 or older, the earnings limits no longer apply.

Are You Better Off Keeping Your
Earnings Under The Limits?

Whether or not you want to work and how much you want to earn are your decisions. But you shouldn't necessarily keep your earnings under Social Security's limits because you think you'll lose too much money. These examples explain why:

Ted Green is 66 years old and receives a monthly Social Security benefit of $800––or $9,600 per year. In 1997, he takes a part--time job but decides to stop working when his earnings reach $12,000––just so he's safely under Social Security's $13,500 limit. His total income is $21,600:

$9,600 in Social Security
+$12,000 in earnings
$21,600 Total Income

His 68--year--old neighbor, Maria Gomez, also receives $800 in Social Security benefits––or $9,600 per year. However, she takes a job that will pay her $22,500 in 1997. That's $9,000 over the limit. We withhold $1 from her Social Security for every $3 over the limit, so we must withhold $3,000 of her Social Security benefits ($9,000 ¸ 3 = $3,000). That means she'll still receive $6,600 from Social Security ($9,600 -- 3,000 = $6,600). Her total income is $29,100:

$6,600 in Social Security
+$22,500 in earnings
$29,100 Total Income

Although Mr. Green receives all his Social Security benefits while Ms. Gomez has $3,000 in benefits withheld, Ms. Gomez comes out substantially ahead in overall income because of her higher earnings.

There's another way Ms. Gomez may come out ahead. When you work, you pay Social Security taxes. And because you pay these taxes, Social Security refigures your benefits to take into account your extra earnings. The higher your earnings, the more your refigured benefit might be. Because Ms. Gomez's earnings are higher, she will probably get a greater increase in her Social Security benefits than Mr. Green.

Your Earnings And Your Benefits––
How Much Will You Get?

The following table gives you an idea of how much Social Security you'll receive for the year based on your monthly benefits and estimated earnings.

For People Under Age 65

If Your
Monthly
Social
Security
Benefit Is
  And
You
Earn
You Will
Receive
Yearly Benefits
Of
$400
400
$8,640 or less
15,000
$4,800
1,620
600
600
600
$8,640 or less
15,000
20,000
7,200
4,020
1,520
800
800
800
$8,640 or less
15,000
20,000
9,600
6,420
3,920
 

For People Age 65 to 69

If Your
Monthly
Social
Security
Benefit Is
  And
You
Earn
You Will
Receive
Yearly
Benefits
of
$400
400
$13,500 or less
20,000
$4,800
2,633
600
600
600
$13,500 or less
20,000 30,000
7,200
5,033
1,700
800
800
800
$13,500 or less
20,000
30,000
9,600
7,433
4,101
 

What Income Counts ...And When Do We Count It?

If you work for someone else, only your wages count toward Social Security's earnings limits. If you're self-employed, we count only your net earnings from self--employment. In either case, we do not count non--work income such as investment earnings, interest, pensions, annuities, capital gains, and other government benefits.

If you work for wages, income counts when it is earned, not when it is paid. If you have income that you earned in one year but the payment was deferred to the following year, it should not be counted as earnings for the year you receive it. Some examples of deferred income include accumulated sick or vacation pay and bonuses.

If you're self--employed, income counts when you receive it––not when you earn it––except if it is paid in a year after you become entitled to Social Security and was earned before you became entitled to Social Security. For example, if you start getting Social Security in June 1997 and you receive some money in February 1998 for work you did before June, it will not count against your 1998 earnings limit. However, if the money you receive in February 1998 was for work you did after June, it will count against your 1998 earnings limit.

A Special Rule For The First Year You Retire

Sometimes, people who retire in mid--year have already earned more than the yearly earnings limit before they retire. That's why there's a special rule that applies to earnings for one year, usually the first year of retirement. Under this rule, you can receive a full Social Security check for any whole month you are “retired,” regardless of your yearly earnings.

In 1997, a person is considered retired if monthly earnings are limited to $720 for people under 65 or $1,125 for people 65 through 69. For example, John Smith retires at age 62 on August 30, 1997. He will make $45,000 through August. He takes a part--time job beginning in September earning $500 per month. Although his earnings for the year substantially exceed the 1997 limit ($8,640), he will receive a Social Security check for September through December because his earnings in those months are under $720, the special “first year of retirement” monthly limit for people under age 65. If John earns more than $720 in any one of those months (September through December), he will not receive a benefit for the month(s) he goes over the limit. Beginning in 1998, only the yearly limits will apply to John because he will be beyond his first year of retirement.

If you're self--employed, we also consider whether you perform substantial services in your business to help us decide if you are retired. One measure of your service is the amount of time you spend working. In general, if you work more than 45 hours a month in self--employment, you are not retired; if you work less than 15 hours a month, you are retired. Work between 15 and 45 hours a month may be considered substantial if you work in an occupation that requires a lot of skill or you are managing a sizeable business.

For detailed information about how we figure the amount of time you spend in your business and whether your work is substantial, call or visit us.

Reporting Changes In Your Earnings

We calculated your benefit payments based on the earnings estimate you gave us when you applied for Social Security or your most recent estimate of earnings annual report. At any time during the year, if you see that your earnings will be different from what you had estimated, you should call us to revise your estimate. This will help us keep the amount of your Social Security benefits correct.

If other family members get benefits on your Social Security record, the total family benefits may be affected by your earnings. This means we may withhold not only your benefits, but those payable to your family as well. But, if you get benefits as a family member, your earnings affect only your own benefits.

If you need help in figuring your earnings, contact us at 1--800--772--1213. When you call, have your Social Security number handy.

Social Security information also is available to users of the Internet. Type http://www.ssa.gov to access Social Security information on the Internet.

Click here for a related Social Security document.

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