Q & A
I want to work while receiving Social Security benefits. Will I be penalized?
Complete Question: I am currently getting Social Security benefits, but they aren’t enough to pay the bills so I want to get a part time job. However, I’ve heard that if I work, my benefits could be reduced. Is this true?
Answer: As with many Social Security issues, the answer is, “it depends”. Your benefits could be reduced if (1) you are not yet full retirement age (FRA); and (2) if you make over a certain amount determined by the Social Security Administration. This is called the Annual Earnings Test (AET). For example: If you will be full retirement age in March, 2015, then in 2014 your benefits will only be reduced if you make more than $15,480. If you do, then your benefits will be reduced by $1 for every $2 over this amount (i.e. if you make $20,000 in 2014, your benefits will be reduced by $2,260. Calculated: $20,000 – $15,480 = $4,520/2 = $2,260). However, the year you turn FRA, this limit goes up to $41,400 and your benefits will be reduced by $1 for every $3 over the limit. So if you make $20,000 in 2015, you will not have a reduction in benefits. If you make $50,000, you will have a reduction of $2,866.67 ($50,000 – $41,400 = $8,600/3 = $2,866.67). Then in 2016 (the first full year you are full retirement age), there is no earnings limit. No matter how much you make, you will not have a benefit reduction. (PLEASE NOTE: These limits are 2014 figures and subject to change for 2015 as set by the Social Security Administration)
C.J. Miles, MBAHCM, MSAResearch Analyst, AMAC Foundation