How Much Can You Make on Social Security?
A lot of people are asking questions such as if I am collecting Social Security benefits how much can I earn without affecting my benefits?, how much can I earn on social security? or how much can you earn while on Social Security? The Social Security Administration has an earnings test for people who receive benefits before their full Social Security retirement age. Let’s take a look below so we can see how much you can make when on social security!
How Much Can You Earn On Social Security?
Currently, you can work and receive all of your Social Security retirement benefit if your earnings are under $14,160 for the year. Social Security considers your earnings from January through December.
Earn While Collecting Social Security!
If you earn over $14,160 you will have $1 for every $2 you go over the $14,160 withheld from your Social Security benefits. If, for example, you earn $20,000 in 2011, Social Security will withhold $2,920 from your monthly benefits.
To determine this you subtract $14,160 from $20,000 which shows you how much you went over the earnings limit. Take the $5,840 and divide it in half and you will have the amount the Social Security Administration will withhold from your monthly benefits. In this case that equals $2,920. ($20,000 – $14,160 = $5840. $5,840 / 2 = $2920). Social Security will withhold all of your benefits until the overage is repaid.
Maximizing Your Social Security Benefits
The rules are a little different in your first year of retirement and the year you reach your full social security retirement age. In your first year of retirement, the Social Security Administration will pay you your monthly retirement benefit regardless of your total earnings for each month your earnings are less than $1,180. This keeps you from being penalized for retiring later in the year.
The year you reach your full retirement age the amount you can earn increases to $37,680 per year. Only your earnings through the month before your birthday are counted. If your earnings are over $37,680 you will have $1 for ever $3 you go over the limit withheld from your benefits.
How Do I Report How Much I Can Earn On Social Security For Taxes?
The earnings that count towards this earnings limit are from wages (as reported on your W-2)or self-employment income (as reported on your Schedule SE). Earnings from other pensions, IRA or 401K distributions, rental income, etc. are not counted towards this limit.
These rules can be confusing and the limits can change from year to year so this is a conversation you need to have with a Social Security claims representative or a Social Security consultant before you file.