How much money can I earn on social security? This is a common question among individuals approaching retirement age or currently receiving social security benefits. Understanding the income limits and potential earnings can help you make informed decisions about your financial future.
Social security benefits are designed to provide a steady income for retirees, disabled individuals, and surviving family members. The amount of money you can earn on social security depends on several factors, including your age, the type of benefit you receive, and your earnings history.
Age and Benefit Type
The age at which you start receiving social security benefits plays a significant role in determining how much you can earn. If you begin receiving benefits before your full retirement age (FRA), your earnings limit may be lower. Conversely, if you wait until after your FRA, you can earn more without affecting your benefits.
For example, if you start receiving benefits at age 62, your earnings limit is $18,960 per year in 2021. If you earn more than this amount, $1 will be deducted from your monthly benefits for every $2 you earn above the limit. However, if you wait until your FRA, which is between 66 and 67 depending on your birth year, your earnings limit increases to $50,520 in 2021. Once you reach your FRA, there is no limit on how much you can earn, and your benefits will not be affected.
Earnings History
Your earnings history also plays a crucial role in determining how much you can earn on social security. The Social Security Administration (SSA) calculates your primary insurance amount (PIA) based on your earnings over your working years. The higher your earnings, the higher your PIA and, consequently, your monthly benefits.
To calculate your PIA, the SSA takes your 35 highest-earning years and averages them. If you have fewer than 35 years of earnings, the SSA will fill in the gaps with zeros. It’s important to note that the SSA uses a formula to adjust your earnings for inflation, which is why your PIA may not be the same as your actual earnings.
Spousal Benefits
If you are married, you may be eligible for spousal benefits based on your spouse’s earnings. In this case, your earnings limit may also apply to your spousal benefits. However, if you are receiving both your own benefits and spousal benefits, the earnings limit only applies to your own benefits.
Conclusion
Understanding how much money you can earn on social security is essential for making informed financial decisions. By considering factors such as your age, benefit type, earnings history, and spousal benefits, you can ensure that you maximize your social security income and plan for a comfortable retirement. Always consult with a financial advisor or the SSA to get personalized advice based on your specific situation.
