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How Much Can you Earn and Draw on Social Security?

You can retire and take Social Security benefits, and still work. But your benefits may be lower if you’re under full retirement age.

Written by Bob Haegele / July 8, 2022

Quick Bites

  • Want to retire but still keep earning? You can collect Social Security and work.
  • If you’re under your retirement age, however, your benefits will be lower.
  • The good news is that once you hit your full retirement age, you can take your full benefit and keep earning.

One day, you will inevitably (probably?) retire, thus becoming eligible to receive Social Security benefits. These payments are a lifeline for millions of Americans needing to cover their basic needs. You may also want to keep working, or at least earning maybe with some kind of a side hustle.

We’ll dive in here to explain a bit about Social Security and the benefits you can draw, while you continue earning.

Inside this article

  1. Social Security
  2. Retired… but still working
  3. Accruing credits
  4. Age and income limits
  5. Can you fool Social Security?
  6. Earning and drawing on
  7. FAQ

A little background on Social Security

Social Security provides retirement benefits to about 65 Americans each month equal to over $1 trillion dollars in total.[1]

These are big numbers, but they don’t say much about Social Security on an individual level. How much you can earn and draw on Social Security depends on a few factors, including your retirement and your taxable income during your highest-earning years.

But what if you are retired and taking benefits but still working? We’ll break down Social Security and how benefits work, especially if you’re still earning.

Can I collect Social Security while I’m still working?

So what happens if you retire and take your Social Security benefits but you still want to earn cash on the side given the increasing cost of everything? You can get Social Security retirement benefits and work at the same time.

Let’s start with the age situation. You can start taking Social Security benefits at age 62, but you won’t get the full amount (that also depends on certain factors, but for now we’re focused on age). Your full retirement age depends on the year you were born. It is 66 if you were born from 1943 to 1954. If you were born between 1955 and 1960, it ranges between 66 and 67. All of those born in 1960 and later get full benefits at age 67.

If you are at full retirement age and earning money, no worries. You’re good to go, no penalties involved.

However, if you are younger than full retirement age and make more than the yearly earnings limit, which is currently $19,560, the Social Security Administration reduces your benefit.

Here’s the formula: If you are under full retirement age for the entire year, SSA will deduct $1 from your benefit payments for every $2 you earn above the annual limit.

Let’s try an example here. Suppose Jamal is 63 and earning $50,000 per year. He’s also claiming Social Security benefits. Fine, no problem. However, he won’t get as much from SSA as he would if he were not working. His benefit will be reduced as follows:

Income: $50,000 minus the limit $19,560 = $30,440 / 2 = $15,220.

Take that $15,220 / 12 months of the year = $1,268.33

If Jamal weren’t earning anything, he’d get $2,000 (we’re making this up entirely, don’t forget) from Social Security. Instead, because he’s working he’ll get $2,000 minus $1,268.33 = $731.66 every month from Social Security.

It’s not so obvious and takes a little math work, but that’s basically how it works.[2,3]

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Accruing credits

In addition to retirement age, you must also earn the necessary credits to qualify for Social Security, as well as to qualify for disability or survivorship benefits. You earn credits when you work and pay Social Security taxes. Since 1978, you can earn a maximum of four credits per year. You need 40 credits to qualify for Social Security.[4]

Credits are based on your total wages and self-employment income for the year. You might work all year to earn four credits, or you might earn enough for all four in much less time.

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The amount of earnings it takes to earn a credit may change each year. For example, in 2022, you earn one Social Security credit for every $1,510 in covered earnings each year. You must earn $6,040 to get the maximum four credits for the year.

Age and income limits

The amount you receive in Social Security benefits depends on your age as well as your income while working. In order to receive the full Social Security benefit, you must wait until age 67 to start claiming benefits if you were born in 1960 or later.[5]

You can start claiming benefits as early as age 62, but your benefit will be reduced. For example, if you were born after 1960 and start claiming benefits at age 62, your benefit amount is reduced by 30%.[6]

On the other hand, you can increase your benefit if you delay Social Security until after your full retirement age. For those born in 1943 or later, your benefit increases by 8% every year you delay benefits until age 70.[7] That results in a maximum increase of 32%.

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Lastly, the SSA calculates your benefit using the average of up to 35 years of your highest-earning years. Specifically, the administration uses your taxable earnings to calculate your benefit. As you earn more, the benefit amount increases, up to $147,000 of taxable income.[8, 9]

Can you fool Social Security?

You generally can’t fool Social Security. Both employers and the IRS send information about your earnings to the Social Security Administration every year.[10] If you want to increase your Social Security benefit, the best way to do so is generally to increase your taxable income before you retire. Even if you could fool the SSA, government agencies don’t usually take kindly to fraud, so that is something that should be avoided.

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How much can you earn and draw on Social Security?

How much you can earn from Social Security depends on your retirement age, plus your income while working. In 2022, the highest monthly benefit you can receive at the full retirement age of 67 is $3,345.[11] If you retire at age 62 in 2022, the maximum amount is $2,364. However, recall that you receive a higher benefit if you delay payments beyond your full retirement age. Thus, if you retire at 70 in 2022, the maximum benefit is $4,194. Keep in mind that these are the highest amounts you can receive.

The key to understanding your Social Security benefit is to stay informed, says Frank Murillo, partner and managing director at Snowden Lane Partners.

“All too often, when I ask a prospective client for their Social Security Estimate statement, they tell me they’ve put it in their special filing cabinet (trash bin),” Murillo says. “Knowing your estimated benefit as well as other sources of income can go a long way to making sure your retirement is successful.”

FAQ

Is it better to take Social Security at 62 or 67?

Generally, it’s better to wait to claim Social Security benefits if you can. The reason is that claiming benefits early will reduce your monthly benefit amount–by up to 30% in 2022, which is the case if you start benefits at age 62.

How much Social Security will I get if I make $60,000 a year?

That depends upon your date of birth and whether you are currently retired. As an example, say you were born in June 1960 and intend to retire in June 2027, which would put you at the full retirement age using today’s rules. Using those numbers, your monthly benefit will be $1,734.00. You can use the SSA’s quick calculator to estimate your monthly benefit.

Article Sources
  1. “Social Security Basic Facts.” Social Security Administration. https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf
  2. “Starting Your Retirement Benefits Early.” Social Security Administration. https://www.ssa.gov/benefits/retirement/planner/agereduction.html
  3. “What happens if I work and get Social Security retirement benefits?” Social Security Administration. https://faq.ssa.gov/en-us/Topic/article/KA-01921
  4. “Social Security Credits.” Social Security Administration. https://www.ssa.gov/benefits/retirement/planner/credits.html
  5. “Social Security Fact Sheet.” Social Security Administration. https://www.ssa.gov/pressoffice/IncRetAge.html
  6. “Starting Your Retirement Benefits Early.” Social Security Administration. https://www.ssa.gov/benefits/retirement/planner/agereduction.html
  7. “Delayed Retirement Credits.” Social Security Administration. https://www.ssa.gov/benefits/retirement/planner/delayret.html
  8. “Social Security Benefit Amounts.” Social Security Administration. https://www.ssa.gov/oact/cola/Benefits.html
  9. “Maximum Taxable Earnings.” Social Security Administration. https://www.ssa.gov/benefits/retirement/planner/maxtax.html
  10. Social Security Administration's Master Earnings File: Background Information.” Social Security Administration. https://www.ssa.gov/policy/docs/ssb/v69n3/v69n3p29.html
  11. “What is the maximum Social Security retirement benefit payable?” Social Security Administration. https://faq.ssa.gov/en-us/Topic/article/KA-01897

About the Author

Bob

Bob Haegele

Bob Haegele is a personal finance writer who specializes in topics such as investing for retirement, credit cards, and insurance. You can find some of his work in Business Insider, Forbes Advisor, and Bankrate.

Full bio

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