Working while on Social Security: Earning limits, taxes & more

Wondering if you can get Social Security benefits and work at the same time? The short answer is yes, you can.

However, certain factors may affect the amount of your monthly Social Security benefit—like your age and your earnings. Here are some key considerations.

You can earn an income and still receive Social Security benefits. However, your benefit may be reduced while you're bringing in earnings.

Earnings are defined as your wages or net profit plus other compensation, such as bonuses, commissions and vacation pay. It does not include interest or investment income, pension payments, annuity payments or veteran, military or other government benefits.

How much you can earn before your benefit is reduced and how the reduction is calculated differs depending on your current age in relation to your full retirement age. For most people encountering this issue in 2024 or later, full retirement age is 67, but if you were born from 1955 to 1959, your full retirement age may be 66 plus a number of months.

Social Security provides rules so you can know how much you can earn from a job while also collecting benefits. Here are the limits and rules based on your age:

• You can earn a maximum of $22,320 before your benefit is reduced in 2024.
• Your earnings for the entire year are counted.
• Your benefit will be reduced by $1 for every $2 you earn beyond that limit.

• You can earn a maximum of $59,520 before your benefit is reduced in 2024.
• Only your earnings up to the month you reach full retirement age are counted.
• Your benefit will be reduced by $1 for every $3 you earn beyond that limit up to the month you reach full retirement age.
• Anything earned after you reach your full retirement age does not reduce the amount of your Social Security benefit.

• You can earn any amount.
• Your benefit will not be reduced.
  

The potential reduction of your Social Security benefit is calculated based on how much beyond the stated limit for your age you've earned.

If you're over the stated limit, take your income and subtract the limit. (If you're younger than full retirement age for the entire year you worked, you'll use your annual income. If you're turning full retirement age in the year you worked, you'll only count income for the months up to when you reached it.) This difference is the amount your benefit reduction will be based on.

Multiply that difference by 50% ($1 for every $2) if you're younger than full retirement age for the entire year you worked, or multiply it by 33% ($1 for every $3) if you're turning it in the year you worked. That's how much your Social Security benefit will be reduced for the year.

Let's say you're 66 or younger (or 65 or younger depending on your full retirement age) for all of 2024 and expect to earn $35,000 from working. That's $12,680 beyond the limit. Your annual Social Security benefit would be reduced $1 for every $2 of that $12,680—or $6,340 (about $528.33 per month).

If you're 66 and turning 67 (or 65 turning 66 and some months, depending on your full retirement age) in 2024, it's slightly more complicated. Let's say you're going to reach full retirement age in May and you expect to earn $90,000 during the year. Before May, you'll have earned only $30,000. That's less than $59,520, so your Social Security benefit wouldn't be reduced.

But let's say you're going to reach full retirement age in November. In this case, you'll have earned $75,000 in the 10 months beforehand. That's $15,480 beyond the limit. Your Social Security benefit for those 10 months would be reduced $1 for every $3 of that $15,480—or about $5,108 (about $510.84 per month).

Senior couple (60yrs) paying bills at home

Senior couple (60yrs) paying bills at home

Social Security for married couples: Optimizing your benefits

Coordinating your Social Security benefits with your spouse's benefits can help you better plan for the retirement you envision. Read on for guidance and common scenarios applicable to married couples nearing age 62.

Get Social Security tips for you and your spouse

Working while receiving a Social Security benefit may seem like you're raking in the money. It can be a great way to get the best of your earning potential while also drawing a steady benefit. But there are tradeoffs to claiming your benefit while you're still on the job if you're younger than full retirement age.

Can you retire at 62 and still work? Yes, but you'll want to assess the full impact of taking your Social Security benefit early across all the rest of your retirement years.

Retiring any time before your full retirement age of 66 or 67 is considered "early." You can start taking Social Security as soon as you turn 62, but doing so means you agree to permanently take a lower amount than you would have gotten if you'd waited until full retirement age or later.

If you're also working and earning more than the limit, this already-lower Social Security benefit will be temporarily decreased even more.

If you want to keep working after reaching age 62, it may be more advantageous for you to hold off on claiming Social Security until you're closer to full retirement age or after reaching it. Not only will you have a higher benefit for all of your retirement years, but you won't have to worry about a temporary benefit reduction based on earning more than the income limit.

At your full retirement age, Social Security will recalculate your benefits based on your highest 35 years of earnings. So even if you take benefits and continue to work, those benefits will be recalculated based on any new higher-earning years.

One of the reasons Social Security is a valuable retirement income source is its favorable taxation. At most, only 85% of your benefit is taxable. In some cases, you may not need to pay taxes on your Social Security benefits at all.

The amount of your benefit that you must include in your taxable income depends on a measure of your combined income. The higher it is, the greater portion of your benefit that may be taxable.

Your combined income is important because it affects how much tax you may owe on your benefits.

To calculate your combined income, add:

• Half of your Social Security benefit
• Your adjusted gross income (AGI)
• Any tax-exempt income

Because earned income is included in your AGI, it increases your combined income, which could mean that more of your Social Security benefit becomes taxable. In turn, the taxes on your Social Security benefits while you're still working may be higher.

Here's what a combined income may look like.

1. Half of your Social Security benefits: Say you and your spouse together receive $2,600 in Social Security benefits each month, or $31,200 per year. Half of $31,200 is $15,600.
2. Adjusted gross income: You and your spouse took $50,000 in 401(k) distributions and earned $2,000 in stock dividends from your taxable brokerage account. Your AGI is $52,000.
3. Nontaxable interest: You earned $1,000 from a long-term, tax-exempt municipal bond fund.
   

Working while receiving Social Security benefits is just one piece of the retirement income puzzle. It helps to know first exactly how much you can earn before it affects your Social Security benefit. Then you'll want to consider other factors, like the long-term impact of decreasing your benefit by taking it early, the timing of your highest-earning years, and how income tax on earnings vs. Social Security comes into play.

But the key thing to keep in mind is your goals. How much you enjoy working, your income needs, and your ideal retirement age are all relevant. Talking it through with a Thrivent financial advisor who understands your big-picture strategy can help you feel confident in your decisions.