Q&A: Limits on Social Security benefits when you work
Posted on 31 March 2010
By Mark Miller
Permanent URL of this article: http://retirementrevised.com/money/qa-limits-on-social-security-benefits-when-you-work
Q: I am 63, and elected to start taking Social Security last year. I am taking a temporary job with the Census Bureau, and expect my earned income this year will exceed [the limit on earned income] of $14,160 by about $2,000. This would ordinarily reduce my Social Security benefit by approximately $1,120. Can I avoid this reduction by making a contribution to my IRA of the amount over the limit?-L.S., via the Internet
A: Unfortunately, no. When you elect to take Social Security benefits before your full retirement age, some of your benefits will be withheld if your earnings exceed the limits set by Social Security law; $1 is deducted from your benefit payments for every $2 you earn above the annual limit (currently, $14,160). IRA contributions can’t be used to offset the reduction. If it’s any consolation, your lifetime benefits are not reduced, because the withheld benefits are added to your benefits after you reach full retirement age.
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April 3rd, 2010 at 11:54 am
‘…the withheld benefits are added to your benefits after you reach full retirement age.’
So, how does that work, exactly? If you take early SS and you start collecting at, say the 85% rate, aren’t you at 85% of the payment for life? And, if so, how is the withheld benefit added?
June 28th, 2010 at 8:35 am
I have a question on SS benefits and FERS. I plan to apply for SS benefits when I turn 66.
I am under FERS and will get my FERS Retirement benefits, I also get my spousal annuity income from OPM. What will be the impact of these two income be,on my Social Security Benefits?
What about my IRA income, will that too impact my SS?
Sue
June 28th, 2010 at 9:14 am
Sue,
I can’t advise on FERS, I’m not expert on the federal plans. I can tell you, howeer, that IRA income isn’t counted in the SS formulas, only income earned from work. Additionally, there is no penalty for earned income once you reach full retirement age (which is about 66).