What Income Reduces Social Security Benefits? Understanding the impact of income on your Social Security benefits is crucial for maximizing your retirement income, and income-partners.net is here to provide the insights you need. By strategically managing your income streams and seeking expert guidance, you can optimize your Social Security benefits and secure a more comfortable retirement. Learn about earnings limits, taxation, and strategies to navigate these complexities, ensuring you make informed decisions about your financial future and boost your partnership income.
1. How Does Income Affect Social Security Benefits?
Income can affect Social Security benefits through earnings limits and taxation. If you are receiving Social Security benefits while still working, your benefits may be reduced if your earnings exceed certain limits. Additionally, a portion of your Social Security benefits may be subject to federal income tax, depending on your overall income level.
1.1. Understanding Earnings Limits
Earnings limits apply to individuals who are receiving Social Security retirement benefits and are younger than their full retirement age (FRA). If your earnings exceed the annual limit, your Social Security benefits will be reduced.
1.1.1. Annual Earnings Limits
The Social Security Administration (SSA) sets an annual earnings limit each year. For 2024, the earnings limit is $22,320. If you earn more than this amount, $1 in benefits will be deducted for every $2 earned above the limit.
1.1.2. Special Rule for the Year You Reach Full Retirement Age
There is a different, more generous rule for the year you reach your full retirement age. In 2024, the earnings limit for this year is $59,520. If you earn more than this amount before the month you reach your FRA, $1 in benefits will be deducted for every $3 earned above the limit. Once you reach your FRA, there is no earnings limit, and you can earn as much as you want without affecting your Social Security benefits.
1.2. Taxation of Social Security Benefits
In addition to earnings limits, your Social Security benefits may be subject to federal income tax. The amount of your benefits that are taxable depends on your combined income, which includes your adjusted gross income (AGI), nontaxable interest, and one-half of your Social Security benefits.
1.2.1. Income Thresholds for Taxation
The following thresholds determine whether your Social Security benefits will be taxed:
- Single filers: If your combined income is between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits. If your combined income is more than $34,000, up to 85% of your benefits may be taxable.
- Married couples filing jointly: If your combined income is between $32,000 and $44,000, you may have to pay income tax on up to 50% of your benefits. If your combined income is more than $44,000, up to 85% of your benefits may be taxable.
1.2.2. Strategies to Minimize Taxation
There are several strategies you can use to minimize the taxation of your Social Security benefits:
- Manage your withdrawals from retirement accounts: Consider the tax implications of withdrawing funds from traditional IRAs and 401(k)s. Roth conversions may also be a useful strategy.
- Control your investment income: Tax-efficient investment strategies can help reduce your overall tax burden.
- Consider working part-time: If you are close to the earnings limit, reducing your work hours can help you avoid benefit reductions and minimize taxation.
2. How Do Earnings Limits Affect Social Security Benefits Before Full Retirement Age?
Earnings limits can significantly affect Social Security benefits before full retirement age by reducing the amount you receive if your earnings exceed the set thresholds. It’s essential to understand these limits to plan your work and benefit claiming strategies effectively.
2.1. Understanding the Reduction in Benefits
If you claim Social Security benefits before your full retirement age (FRA) and continue to work, the Social Security Administration (SSA) will reduce your benefits if your earnings exceed a certain limit. This reduction is designed to adjust benefits based on your ongoing income, reflecting the idea that Social Security is intended to replace income lost due to retirement or disability.
2.1.1. The Mechanics of Benefit Reduction
For every $2 you earn above the annual limit, the SSA deducts $1 from your Social Security benefits. For example, if the annual earnings limit is $22,320 and you earn $32,320, your earnings exceed the limit by $10,000. As a result, your Social Security benefits will be reduced by $5,000.
2.1.2. Example Scenario
Imagine you decide to start receiving Social Security benefits at age 62, well before your FRA. Your estimated monthly benefit is $1,500. However, you continue to work and earn $42,320 in a year. This is $20,000 over the annual earnings limit. The SSA will reduce your benefits by $10,000, spread out over the year. Instead of receiving $1,500 per month, your benefits will be reduced by $833.33 per month, resulting in a monthly payment of $666.67.
2.2. Special Rule for the Year of Reaching Full Retirement Age
In the year you reach your full retirement age, the earnings limit is higher, and the reduction in benefits is less severe. This rule acknowledges that you are closer to full retirement and adjusts the impact of earnings on your benefits accordingly.
2.2.1. Higher Earnings Limit
For the year you reach FRA, the earnings limit is significantly higher than the standard annual limit. In 2024, this limit is $59,520. This means you can earn more without facing a reduction in benefits.
2.2.2. Less Severe Benefit Reduction
The reduction in benefits is also less severe. For every $3 you earn above the limit, the SSA deducts $1 from your benefits. This is more favorable than the $1 reduction for every $2 earned before reaching FRA.
2.2.3. Example Scenario
Suppose you are turning 67 in 2024, which is your full retirement age. Before your birthday month, you earn $79,520. This is $20,000 over the earnings limit of $59,520. The SSA will reduce your benefits by $6,666.67 ($20,000 divided by 3). After you reach your full retirement age, there is no earnings limit, and you can earn as much as you want without affecting your Social Security benefits.
2.3. How Your Benefits Are Recalculated
It’s important to know that the reductions in your Social Security benefits due to excess earnings are not permanent. Once you reach your full retirement age, the SSA recalculates your benefit amount to account for the months in which your benefits were reduced.
2.3.1. Recalculation Process
The SSA reviews your earnings record and recalculates your benefit as if the months in which your benefits were reduced were not included in your initial benefit calculation. This adjustment increases your monthly benefit amount, helping to make up for the earlier reductions.
2.3.2. Long-Term Impact
While the initial reduction in benefits may seem like a significant loss, the recalculation at FRA ensures that you receive a higher monthly benefit for the remainder of your life. This can have a substantial impact on your overall retirement income, providing greater financial security.
2.4. Strategies to Manage Earnings and Benefits
To effectively manage the impact of earnings limits on your Social Security benefits, consider the following strategies:
- Plan your retirement date: Carefully consider when to start receiving Social Security benefits and how this aligns with your work plans. Delaying benefits until FRA can avoid earnings limits altogether.
- Adjust your work hours: If you are close to the earnings limit, reducing your work hours can help you stay below the limit and avoid benefit reductions.
- Explore alternative income sources: Consider other sources of income that do not count toward the earnings limit, such as investment income or Roth IRA withdrawals.
- Consult a financial advisor: A financial advisor can help you develop a comprehensive retirement plan that optimizes your Social Security benefits and minimizes the impact of earnings limits.
3. What Types of Income Affect Social Security Benefits?
Not all income affects Social Security benefits. Understanding which types of income are considered when calculating potential benefit reductions is crucial for effective retirement planning.
3.1. Earned Income
Earned income is the primary type of income that affects Social Security benefits before full retirement age. It includes wages, salaries, and net earnings from self-employment.
3.1.1. Wages and Salaries
Wages and salaries are payments received for work performed as an employee. These earnings are reported to the Social Security Administration (SSA) through W-2 forms.
3.1.2. Self-Employment Income
Self-employment income is the net profit you earn from operating a business. This includes income from freelancing, consulting, and other entrepreneurial activities. The SSA considers your net earnings after deducting business expenses.
3.1.3. Example Scenario
Suppose you receive $30,000 in wages from a part-time job and also earn $10,000 in net income from your freelance business. Your total earned income for Social Security purposes is $40,000. If you are below your full retirement age and the annual earnings limit is $22,320, your benefits will be reduced because your earnings exceed the limit.
3.2. Unearned Income
Unearned income generally does not affect Social Security benefits. This includes income from investments, pensions, and other sources that are not directly tied to your current work activity.
3.2.1. Investment Income
Investment income includes dividends, interest, capital gains, and rental income. These types of income are not considered when determining whether your Social Security benefits should be reduced due to excess earnings.
3.2.2. Pensions and Retirement Accounts
Income from pensions, annuities, and withdrawals from retirement accounts such as 401(k)s and traditional IRAs does not count toward the earnings limit. However, these income sources can affect the taxation of your Social Security benefits.
3.2.3. Other Sources of Unearned Income
Other sources of unearned income that do not affect Social Security benefits include:
- Social Security benefits (other than your own retirement or disability benefits)
- Unemployment benefits
- Workers’ compensation
- Gifts and inheritances
3.3. Income That Affects Taxation of Social Security Benefits
While unearned income does not directly reduce your Social Security benefits through the earnings limit, it can affect the amount of your benefits that are subject to federal income tax.
3.3.1. Combined Income Calculation
The amount of your Social Security benefits that are taxable depends on your combined income, which is calculated as:
Adjusted Gross Income (AGI) + Nontaxable Interest + One-Half of Your Social Security Benefits
3.3.2. Taxation Thresholds
The thresholds for taxation of Social Security benefits are as follows:
- Single filers: If your combined income is between $25,000 and $34,000, up to 50% of your benefits may be taxable. If your combined income is above $34,000, up to 85% of your benefits may be taxable.
- Married couples filing jointly: If your combined income is between $32,000 and $44,000, up to 50% of your benefits may be taxable. If your combined income is above $44,000, up to 85% of your benefits may be taxable.
3.3.3. Example Scenario
Suppose you are a single filer with an AGI of $30,000, $2,000 in nontaxable interest, and receive $18,000 in Social Security benefits. Your combined income is:
$30,000 (AGI) + $2,000 (Nontaxable Interest) + ($18,000 / 2) (One-Half of Social Security Benefits) = $41,000
Since your combined income is above $34,000, up to 85% of your Social Security benefits may be taxable.
3.4. Strategies to Minimize the Impact of Income
To minimize the impact of income on your Social Security benefits, consider the following strategies:
- Manage earned income: If you are receiving Social Security benefits before FRA, carefully manage your earned income to stay below the annual earnings limit.
- Optimize investment strategies: Consider tax-efficient investment strategies to reduce your AGI and minimize the taxation of your Social Security benefits.
- Consider Roth conversions: Converting funds from traditional IRAs to Roth IRAs can reduce your taxable income in retirement.
- Consult a tax professional: A tax professional can help you develop a comprehensive tax plan that optimizes your Social Security benefits and minimizes your overall tax liability.
4. How Does Working While Receiving Social Security Affect Your Benefits?
Working while receiving Social Security can affect your benefits in several ways, primarily through the earnings limit if you are under your full retirement age and through potential taxation. Understanding these effects is key to making informed decisions about your work and retirement plans.
4.1. Impact of Earnings Limit Before Full Retirement Age
If you choose to receive Social Security benefits before reaching your full retirement age (FRA) and continue to work, your benefits may be reduced if your earnings exceed the annual limit set by the Social Security Administration (SSA).
4.1.1. Reduction in Benefits
For every $2 you earn above the annual earnings limit, the SSA will deduct $1 from your Social Security benefits. This can significantly reduce the amount of benefits you receive each month.
4.1.2. Example Scenario
Suppose you start receiving Social Security benefits at age 62, and your estimated monthly benefit is $1,200. If you work part-time and earn $32,320 in a year, which is $10,000 above the 2024 annual earnings limit of $22,320, your benefits will be reduced by $5,000. This means your monthly benefit will be reduced by $416.67, resulting in a payment of $783.33 per month.
4.1.3. Considerations for Self-Employed Individuals
If you are self-employed, the earnings limit applies to your net earnings, which is your profit after deducting business expenses. It’s essential to accurately track your income and expenses to determine how your earnings will affect your Social Security benefits.
4.2. Special Rule for the Year of Reaching Full Retirement Age
In the year you reach your full retirement age, a different, more generous rule applies. The earnings limit is higher, and the reduction in benefits is less severe.
4.2.1. Higher Earnings Limit
For the year you reach FRA, the earnings limit is significantly higher. In 2024, this limit is $59,520. This allows you to earn more without facing a significant reduction in benefits.
4.2.2. Less Severe Benefit Reduction
The reduction in benefits is also less severe during this year. For every $3 you earn above the limit, the SSA deducts $1 from your benefits.
4.2.3. Example Scenario
Suppose you are turning 67 (your full retirement age) in 2024. Before your birthday month, you earn $79,520. This is $20,000 over the earnings limit of $59,520. The SSA will reduce your benefits by $6,666.67 ($20,000 divided by 3). After you reach your full retirement age, there is no earnings limit, and you can earn as much as you want without affecting your Social Security benefits.
4.3. No Earnings Limit After Full Retirement Age
Once you reach your full retirement age, there is no limit to how much you can earn without affecting your Social Security benefits. You can work as much as you want and still receive your full benefit amount.
4.3.1. Recalculation of Benefits
The SSA recalculates your benefit amount to account for the months in which your benefits were reduced due to excess earnings. This adjustment increases your monthly benefit amount, helping to make up for the earlier reductions.
4.3.2. Long-Term Financial Impact
While the initial reduction in benefits may seem like a drawback, the recalculation at FRA ensures that you receive a higher monthly benefit for the remainder of your life. This can significantly enhance your overall retirement income and financial security.
4.4. Taxation of Social Security Benefits
Working while receiving Social Security benefits can also affect the amount of your benefits that are subject to federal income tax. The more income you have, the higher the likelihood that a portion of your Social Security benefits will be taxed.
4.4.1. Combined Income Calculation
The amount of your Social Security benefits that are taxable depends on your combined income, which includes:
Adjusted Gross Income (AGI) + Nontaxable Interest + One-Half of Your Social Security Benefits
4.4.2. Taxation Thresholds
The thresholds for taxation of Social Security benefits are as follows:
- Single filers: If your combined income is between $25,000 and $34,000, up to 50% of your benefits may be taxable. If your combined income is above $34,000, up to 85% of your benefits may be taxable.
- Married couples filing jointly: If your combined income is between $32,000 and $44,000, up to 50% of your benefits may be taxable. If your combined income is above $44,000, up to 85% of your benefits may be taxable.
4.5. Strategies for Working While Receiving Social Security
To effectively manage the impact of working on your Social Security benefits, consider the following strategies:
- Delay Social Security benefits: If possible, delay receiving Social Security benefits until your full retirement age to avoid the earnings limit altogether.
- Adjust work hours: If you choose to receive benefits early, adjust your work hours to stay below the annual earnings limit.
- Optimize investment strategies: Consider tax-efficient investment strategies to reduce your adjusted gross income and minimize the taxation of your Social Security benefits.
- Consult a financial advisor: A financial advisor can help you develop a comprehensive retirement plan that optimizes your Social Security benefits and minimizes the impact of working while receiving benefits.
5. What Are the Social Security Earnings Test Rules?
The Social Security earnings test rules determine how your earned income affects your Social Security benefits if you are receiving benefits before your full retirement age. Understanding these rules is vital for making informed decisions about working while receiving benefits.
5.1. General Overview of the Earnings Test
The Social Security earnings test is a provision that reduces your Social Security benefits if your earnings exceed certain limits while you are under your full retirement age (FRA). The purpose of this test is to adjust benefits based on ongoing income, reflecting that Social Security is designed to replace income lost due to retirement or disability.
5.1.1. Who Is Subject to the Earnings Test?
The earnings test applies to individuals who are receiving Social Security retirement benefits and are younger than their full retirement age. It does not apply to those receiving Social Security disability benefits or to individuals who have reached their FRA.
5.1.2. How the Earnings Test Works
If your earnings exceed the annual limit, your Social Security benefits will be reduced. The reduction is calculated based on a formula set by the Social Security Administration (SSA).
5.2. Specific Rules and Limits
The SSA sets specific rules and limits each year for the earnings test. These rules determine how much you can earn before your benefits are reduced and how the reduction is calculated.
5.2.1. Annual Earnings Limit
The annual earnings limit is the amount you can earn in a year before your Social Security benefits are reduced. For 2024, the earnings limit is $22,320. If you earn more than this amount, $1 in benefits will be deducted for every $2 earned above the limit.
5.2.2. Special Rule for the Year You Reach FRA
There is a special rule for the year you reach your full retirement age. The earnings limit is higher, and the reduction in benefits is less severe. In 2024, the earnings limit for this year is $59,520. If you earn more than this amount before the month you reach your FRA, $1 in benefits will be deducted for every $3 earned above the limit.
5.2.3. No Earnings Limit After FRA
Once you reach your full retirement age, there is no earnings limit. You can earn as much as you want without affecting your Social Security benefits.
5.3. How Benefits Are Affected
The earnings test can significantly affect your Social Security benefits if you are working while receiving benefits before your FRA.
5.3.1. Reduction Calculation
For every $2 you earn above the annual earnings limit, $1 is deducted from your Social Security benefits. This reduction is applied throughout the year, reducing your monthly benefit amount.
5.3.2. Example Scenario
Suppose you start receiving Social Security benefits at age 62, and your estimated monthly benefit is $1,500. If you work part-time and earn $37,320 in a year, which is $15,000 above the 2024 annual earnings limit of $22,320, your benefits will be reduced by $7,500. This means your monthly benefit will be reduced by $625, resulting in a payment of $875 per month.
5.4. Recalculation of Benefits at FRA
It’s important to note that the reductions in your Social Security benefits due to the earnings test are not permanent. Once you reach your full retirement age, the SSA recalculates your benefit amount to account for the months in which your benefits were reduced.
5.4.1. Adjustment Process
The SSA reviews your earnings record and recalculates your benefit as if the months in which your benefits were reduced were not included in your initial benefit calculation. This adjustment increases your monthly benefit amount, helping to make up for the earlier reductions.
5.4.2. Impact on Long-Term Benefits
While the initial reduction in benefits may seem like a loss, the recalculation at FRA ensures that you receive a higher monthly benefit for the remainder of your life. This can have a substantial impact on your overall retirement income and financial security.
5.5. Strategies to Navigate the Earnings Test
To effectively navigate the Social Security earnings test, consider the following strategies:
- Delay Social Security benefits: If possible, delay receiving Social Security benefits until your full retirement age to avoid the earnings test altogether.
- Adjust work hours: If you choose to receive benefits early, adjust your work hours to stay below the annual earnings limit.
- Explore alternative income sources: Consider other sources of income that do not count toward the earnings limit, such as investment income or Roth IRA withdrawals.
- Consult a financial advisor: A financial advisor can help you develop a comprehensive retirement plan that optimizes your Social Security benefits and minimizes the impact of the earnings test.
6. Can You Avoid the Social Security Earnings Test?
Yes, you can avoid the Social Security earnings test primarily by delaying your Social Security benefits until you reach your full retirement age. This is the most straightforward way to ensure your earnings do not reduce your benefits.
6.1. Delaying Benefits Until Full Retirement Age (FRA)
The most effective way to avoid the Social Security earnings test is to delay receiving benefits until you reach your full retirement age. Once you reach FRA, you can earn any amount without affecting your Social Security benefits.
6.1.1. Benefits of Delaying
Delaying your benefits not only helps you avoid the earnings test but also increases your monthly benefit amount. For each year you delay receiving benefits after your FRA (up to age 70), your benefit increases by about 8%. This can significantly boost your retirement income.
6.1.2. Example Scenario
Suppose your full retirement age is 67, and your estimated monthly benefit at that age is $2,000. If you delay receiving benefits until age 70, your monthly benefit will increase by 24% (8% per year for three years), resulting in a monthly benefit of $2,480.
6.2. Reducing Your Work Hours
If you want to receive Social Security benefits before your FRA but still want to minimize the impact of the earnings test, you can reduce your work hours to stay below the annual earnings limit.
6.2.1. Staying Below the Limit
The annual earnings limit for 2024 is $22,320. If you can keep your earnings below this amount, your Social Security benefits will not be reduced.
6.2.2. Example Scenario
Suppose you start receiving Social Security benefits at age 62, and your estimated monthly benefit is $1,200. If you adjust your work hours to ensure your annual earnings do not exceed $22,320, you will receive your full Social Security benefit each month.
6.3. Exploring Alternative Income Sources
Another strategy to avoid the earnings test is to explore alternative income sources that do not count toward the earnings limit.
6.3.1. Investment Income
Investment income, such as dividends, interest, and capital gains, does not count toward the earnings limit. You can supplement your Social Security benefits with investment income without affecting your benefits.
6.3.2. Roth IRA Withdrawals
Withdrawals from Roth IRAs are also tax-free and do not count toward the earnings limit. This can be a valuable source of income in retirement.
6.3.3. Other Non-Earned Income
Other sources of non-earned income that do not affect the earnings test include pensions, annuities, and rental income.
6.4. Understanding the Special Rule for the Year of FRA
In the year you reach your full retirement age, a more generous earnings limit applies. This can provide more flexibility in managing your earnings and benefits.
6.4.1. Higher Earnings Limit
The earnings limit for the year you reach FRA is significantly higher than the standard annual limit. In 2024, this limit is $59,520.
6.4.2. Less Severe Reduction
The reduction in benefits is also less severe during this year. For every $3 you earn above the limit, the SSA deducts $1 from your benefits.
6.5. Consulting with a Financial Advisor
Navigating the Social Security earnings test can be complex. Consulting with a financial advisor can help you develop a personalized strategy that optimizes your Social Security benefits and minimizes the impact of the earnings test.
6.5.1. Comprehensive Retirement Planning
A financial advisor can help you create a comprehensive retirement plan that considers your income needs, work plans, and Social Security benefits.
6.5.2. Tax Planning Strategies
A financial advisor can also provide tax planning strategies to minimize the taxation of your Social Security benefits and other income sources.
7. What Happens to Social Security Benefits That Are Withheld Due to Excess Earnings?
Social Security benefits that are withheld due to excess earnings are not lost permanently. The Social Security Administration (SSA) recalculates your benefit amount once you reach your full retirement age (FRA) to account for these withholdings, increasing your future monthly payments.
7.1. Recalculation at Full Retirement Age
When you reach your FRA, the SSA automatically recalculates your Social Security benefit to reflect any months in which your benefits were reduced due to the earnings test.
7.1.1. Review of Earnings Record
The SSA reviews your complete earnings record to identify the months in which your benefits were reduced.
7.1.2. Adjustment of Benefit Amount
The SSA then adjusts your benefit amount as if those months of reduced benefits were not included in your initial benefit calculation. This adjustment results in a higher monthly benefit payment for the remainder of your life.
7.2. How the Recalculation Works
The recalculation process ensures that you eventually receive the full value of the Social Security benefits you are entitled to, even if your benefits were temporarily reduced due to excess earnings.
7.2.1. Example Scenario
Suppose you started receiving Social Security benefits at age 62 and worked part-time, exceeding the annual earnings limit in several years. As a result, your benefits were reduced by a total of $10,000 over those years. When you reach your full retirement age, the SSA will recalculate your benefit amount, factoring in those withholdings. This recalculation will increase your monthly benefit to compensate for the previously withheld amounts.
7.2.2. Impact on Monthly Payments
The increase in your monthly payment will depend on the total amount of benefits withheld and your life expectancy. The SSA will ensure that the increased monthly payments reflect the actuarial value of the withheld benefits.
7.3. Long-Term Financial Impact
The recalculation of benefits at FRA can have a significant impact on your long-term financial security. The increased monthly payments can provide additional income to cover your living expenses and enhance your overall retirement lifestyle.
7.3.1. Increased Retirement Income
The higher monthly benefit resulting from the recalculation can provide a substantial boost to your retirement income, helping you maintain your standard of living.
7.3.2. Financial Security
The increased income can also provide greater financial security, giving you peace of mind knowing that you have additional resources to meet your needs in retirement.
7.4. Considerations for Planning
Understanding that withheld benefits are eventually returned through recalculation can influence your decisions about working while receiving Social Security benefits.
7.4.1. Balancing Work and Benefits
Knowing that you will eventually receive the full value of your benefits can make it easier to balance your desire to work with the need to maximize your Social Security income.
7.4.2. Retirement Planning
This knowledge can also inform your overall retirement planning, helping you make more informed decisions about when to retire, how much to work, and how to manage your finances.
7.5. Consulting with a Financial Advisor
To fully understand the implications of withheld benefits and the recalculation process, it is beneficial to consult with a financial advisor.
7.5.1. Personalized Financial Advice
A financial advisor can provide personalized advice based on your unique circumstances, helping you make the best decisions about working while receiving Social Security benefits.
7.5.2. Comprehensive Retirement Strategy
A financial advisor can also help you develop a comprehensive retirement strategy that takes into account your Social Security benefits, work plans, and other sources of income.
8. How Do Spousal Benefits Affect the Impact of Income on Social Security?
Spousal benefits can significantly affect the impact of income on Social Security, particularly if one spouse earns substantially more or less than the other. Understanding how these benefits interact with earnings limits and taxation is crucial for effective retirement planning.
8.1. Overview of Spousal Benefits
Spousal benefits are Social Security benefits paid to the spouse of a retired or disabled worker. These benefits can provide additional income to the household, especially if one spouse has limited or no earnings history.
8.1.1. Eligibility for Spousal Benefits
To be eligible for spousal benefits, you must be:
- Married to someone who is receiving Social Security retirement or disability benefits.
- At least 62 years old, or caring for a child who is under age 16 or disabled.
- Earning less, you will only receive your spousal benefit, instead of your retirement benefit.
8.1.2. Benefit Amount
The maximum spousal benefit is generally 50% of the worker’s primary insurance amount (PIA). However, if you start receiving spousal benefits before your full retirement age, the benefit amount will be reduced.
8.2. Impact of Earnings Limits on Spousal Benefits
If you are receiving spousal benefits before your full retirement age and continue to work, your spousal benefits may be reduced if your earnings exceed the annual earnings limit.
8.2.1. Application of Earnings Limit
The same earnings limit that applies to retirement benefits also applies to spousal benefits. For 2024, the earnings limit is $22,320. If you earn more than this amount, $1 in spousal benefits will be deducted for every $2 earned above the limit.
8.2.2. Example Scenario
Suppose you are receiving spousal benefits at age 62, and your estimated monthly spousal benefit is $800. If you work part-time and earn $32,320 in a year, which is $10,000 above the 2024 annual earnings limit, your spousal benefits will be reduced by $5,000. This means your monthly spousal benefit will be reduced by $416.67, resulting in a payment of $383.33 per month.
8.3. Special Rule for the Year of Reaching FRA
In the year you reach your full retirement age, the earnings limit is higher, and the reduction in benefits is less severe, just as with retirement benefits.
8.3.1. Higher Earnings Limit
The earnings limit for the year you reach FRA is significantly higher. In 20
