How Working during Retirement Can Affect Your Social Security Benefits

You can collect Social Security retirement benefits and work at the same time, but depending on how old you are and how much you earn, some or all of your benefits could be temporarily withheld. Here's what you should know.

Working Rules

If you're under your full retirement age and are collecting benefits, then you can earn up to $16,920 in 2017 without jeopardizing any of your Social Security if you don't reach your full retirement age this year. But, if you earn more than the $16,920 limit, you'll lose $1 in benefits for every $2 over that amount. Note that if you were born between 1943 and 1954, then your full retirement age is 66. If you were born in 1955 or later, then your full retirement age is 66 and two months.

In the year you reach your full retirement age, a less stringent rule applies. If you reach your full retirement age in 2017, you can earn up to $44,880 from January to the month of your birthday with no penalty. But if you earn more than $44,880 during that time, you'll lose $1 in benefits for every $3 over that limit. And, once your birthday passes, you can earn any amount by working without your benefits being reduced at all.

Wages, bonuses, commissions and vacation pay all count toward the income limits, but pensions, annuities, investment earnings, interest, capital gains and government or military retirement benefits do not. To figure out how much your specific earnings will affect your benefits, see the Social Security Retirement Earnings Test Calculator at SSA.gov/OACT/COLA/RTeffect.html.

It's also important to know that if you do lose some or all of your Social Security benefits because of the earning limits, the benefits will not be lost forever. When you reach full retirement age, your benefits will be recalculated to a higher amount to make up for what was withheld. For details and examples of how this is calculated, see SSA.gov/planners/retire/whileworking2.html.

For more information on how working can affect your Social Security benefits see SSA.gov/planners/retire/whileworking.html, or call the Social Security Administration at 410-965-2039 and ask to receive a free copy of publication number 05-10069, "How Work Affects Your Benefits."

Tax Factor

In addition to the Social Security rules, you need to factor in Uncle Sam too. Because working increases your income, it might make your Social Security benefits taxable.

Here's how it works. If the sum of your adjusted gross income, nontaxable interest and half of your Social Security benefits is between $25,000 and $34,000 for individuals ($32,000 and $44,000 for couples), you have to pay tax on up to 50% of your benefits. If the sum is above $34,000 ($44,000 for couples), then you could pay tax on up to 85% of your benefits, which is the highest portion of Social Security that is taxable. About a third of all people who get Social Security have to pay income taxes on their benefits.

For information, call the IRS at 800-829-3676 and ask them to mail you a free copy of Publication 915, "Social Security and Equivalent Railroad Retirement Benefits." Alternatively, you can access it online at IRS.gov/pub/irs-pdf/p915.pdf.

In addition to the federal government, 13 states - Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia - tax Social Security benefits to some extent too. If you live in one of these states, you'll need to check with your state tax agency for details.

Savvy Living is written by Jim Miller, a regular contributor to the NBC Today Show and author of "The Savvy Living” book. Any links in this article are offered as a service and there is no endorsement of any product. These articles are offered as a helpful and informative service to our friends and may not always reflect this organization’s official position on some topics. Jim invites you to send your senior questions to: Savvy Living, P.O. Box 5443, Norman, OK 73070.