How Much Money Can a Retired Person Who Is on Social Security Make?
The amount you receive in Social Security benefits is not always enough to pay all of your bills. While it is a retirement benefit, you may not be able to afford to retire. Even when recipients of Social Security don’t have to work for financial reasons, they may still want to continue working, yet don’t want to forfeit any funds they are entitled to receive in Social Security benefits.
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Retirement Age
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Social Security retirement age is between ages 65 and 67, depending on the year you were born. If you are eligible to collect Social Security benefits and born by 1937, you can begin collecting full retirement benefits at age 65. If born after that date, you must wait to collect full retirement, sometime during the following two years, depending on your date of birth. Once you reach your full retirement age, you can earn as much money as you want without reducing the Social Security benefits you receive.
Early Retirement
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If you are entitled to Social Security benefits, you can begin collecting at age 62. Yet, this means you will receive a reduced amount. Depending on how early you begin collecting Social Security, your benefit might be reduced by between 20 and 30 percent. While collecting Social Security before your full retirement age, you are limited in how much you can earn. If you earn more than the limit, your Social Security benefits reduce again.
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Income Limits
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In 2011, you can collect early Social Security and make up to $14,160 a year without penalty. For each $2 you earn over the limit, Social Security deducts $1 from your benefit amount. Once you reach the year of your full retirement age, yet before the month you reach full retirement, you can earn up to $37,680 without penalty. For each $3 you earn over the limit, Social Security deducts $1 from your benefit amount.
Income Definition
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Not everything your earn counts as additional income when calculating the limit in earnings. For example, inheritance payments, pensions, IRS distributions, interest, 401(k) distributions and investment income are not included. Limits apply to gross earnings as an employee and net earnings if self-employed. Gross employee wages are earnings before payroll deductions for insurance, dues, income tax and Social Security tax. Special wage payments for work completed prior to retirement are not included. For self-employed, the net income is earnings after deducting losses.
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