If you work after reaching the age of 62, your income affects your Social Security benefits. If you earn a higher income, you may be entitled to a higher benefit amount to begin with, but may lose some of your yearly benefit amount until you reach retirement age. If you choose to work after reaching retirement age, make sure that you earn enough including your reduced Social Security benefits to meet your financial needs.
Full Retirement Age
As of April 2011, the Social Security Administration considers you to be full retirement age if you are 66 years old on the first day of the year. If you turn 66 during the year, you have to wait until the following January to be considered full retirement age. Once you reach full retirement age, you may work as many hours as you would like and still receive full Social Security retirement benefits.
If you are 65 years old on Jan. 1, you are considered retired but not fully retired. The Social Security Administration therefore allows you to earn only $37,680 without it affecting your retirement benefits. For every $3 you earn above the income limit, the Social Security Administration deducts $1 from your benefits. The benefit deduction stops on your 66th birthday.
Other Retired Workers
If you are old enough to receive Social Security benefits but will not turn 66 any time during the year -- i.e., you are 62 through 64 years old on Jan. 1 -- the Social Security Administration allows you to earn $14,160 without penalty. If you earn more than this amount, the Social Security Administration deducts $1 from your benefits for each $2 you earn.
Social Security considers all income you earn in a year, even if you are not paid until the following year. Thus, if you earn money in December, it may affect your Social Security benefits for the following year even if you don't get paid until January. Non-wages, such as bonuses or unused vacation pay, are not subject to this rule; the Social Security Administration counts them toward your income limit in the year they were paid.
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