Contrary to traditional beliefs, receiving Social Security benefits doesn’t necessarily mean the end of your working days. I. Many Social Security recipients continue to earn income from their employment. However, the catch lies in how their benefits are affected, which largely depends on their age and the extent of their earnings.
For example, the Social Security Administration (SSA) categorizes individuals as “retired” once they commence receiving retirement benefits. If you happen to be below the full retirement age (FRA) and earn more than the SSA’s annual earnings limit, it might lead to a reduction in your benefits. The FRA is either 66 or 67 years, depending on your birth year, with the distinction being drawn at whether you were born before or after 1960.
Changes Coming to the Social Security System: How Will Them Affect You?
The SSA periodically revises the income limits related to work earnings. On October 12, 2023, the SSA is expected to unveil the new earnings test limit for 2024, according to a report by several media sites. This adjustment is significant as it can provide Social Security beneficiaries with greater flexibility to increase their income without the risk of reduced benefits.

Understanding the mechanics of the earnings test limit is critical to understand how these modifications could affect you. If an individual is below FRA for an entire year, the SSA follows a specific formula. For every $2 earned over the annual limit, the agency deducts $1 from the benefit payment.
The SSA considers earnings only up to the month prior to reaching FRA, rather than the cumulative earnings for the entire year. As of 2023, the limit for recipients who have not reached their FRA is set at $21,240. Upon reaching FRA, a different formula comes into play. At this point, $1 in benefits is deducted for every $3 earned over a separate limit. In 2023, this limit is $56,520. I know, it’s complicated and tricky, but give it a little time, and you’ll finally get it (it took us a while to get it too).
More Metrics Coming Into Play When Calculating Social Security Allotments
When calculating the deduction from benefits, the SSA focuses on wages earned from employment or net profits for self-employed individuals. This includes various forms of compensation, such as bonuses, commissions, and vacation pay. Importantly, the SSA does not factor in pensions, annuities, investment income, interest, veterans benefits, or other government or military retirement benefits.
For those who anticipate earning more than the yearly limit and only receive retirement benefits for part of the year, the SSA has a specific rule that applies to earnings within a single year. Under this rule, a full Social Security benefit is paid for any whole month that the SSA considers an individual as retired, regardless of their annual earnings.
Here’s an example to understand this spiderweb of number and concepts:
To illustrate how earnings affect your Social Security benefits, the SSA provides the following example: Let’s say you are below the FRA for the entire year and are entitled to get paid $800 per month in benefits, for a grand total of $9,600 along the entire year. During that same year, you decide to work and earn $31,240, which is $10,000 more than the annual limit of $21,240. Here’s how this impacts your benefits:
- Your Social Security benefits will be reduced by $5,000, calculated as a reduction of $1 for every $2 you earned over the limit.
- As a result, you would receive $4,600 out of your initial $9,600 in benefits for the year, calculated as follows: $9,600 – $5,000 = $4,600.