SLEDGE: How does working after I retire affect my benefits?

Ned Sledge is a Social Security Public Affairs Specialist in Richmond. Questions about Social Security issues may be directed to him by e-mailing .
Published: October 1, 2008

Q: I recently read your column regarding the person turning 66 at the end of June and applying online for benefits.  You mentioned that as of June 2009 there would no longer be any restriction on how much can be earned and still receive all benefits. I plan to retire next year, at age 62, and know I will receive reduced benefits. I plan to work part-time and wonder if the dollar restriction applies in my case. — Nancy C.
A: This is a very good question and one I often hear.
The current restrictions on earnings for those under their full retirement age — 66, of course, for you — are as follows:
1) From age 62 until the end of the year before the year you reach your full retirement age (for you, since you’ll turn 66 in 2013, that means from age 62 through December 31, 2012), you’re currently held to $13,560 a year. This goes up a bit each year, but next year’s limit hasn’t been announced yet. If you make more than this limit, they’ll hold back $1 in benefits for every $2 you go over. So if you make, say, $23,560, you’ll exceed the limit by $10,000, and therefore they’ll hold back $5000 in benefits.
2) From January 1 of the year you reach full retirement age through the month before the month you reach that age — for you, this means from Jan. 1, 2013, through the month before you turn 66 — they currently let you earn up to $36,120 before they start imposing withholdings — and even then they’ll hold back just $1 for every $3. Again, this amount increases each year.
3) Finally, beginning with the first day of the month you reach 66, the sky’s the limit!
It’s important to know that the only money that counts towards these limits is earned income, meaning gross wages from employment or net earnings from self-employment. Pensions, investment or rental income, interest on savings accounts, etc., do not count towards the limit.
Finally, for the first year you retire, we can use a monthly earnings test instead of an annual one if this is best for you. The monthly limit for 2008 is $1130. This lets us disregard all the earnings you had for the part of the year before your entitlement to retirement benefits began. This year, for example, if someone were to become entitled to benefits in, say, September, their earnings through August would not be counted, no matter how much they made, and we’d pay them from September on so long as they didn’t make over $1130 in any one month after August.