(bright music) <v ->Hi, I'm Yvette with AARP.</v> I lead workshops in my community to help older adults stay connected and age successfully. Let's talk about the Social Security retirement earnings test. If you have reached Full Retirement Age or older, you can work and earn any amount and collect your Social Security benefit. But if you're under Full Retirement Age, there's a limit on how much you can earn before it affects your Social Security benefit. Let's watch a short video to learn more. <v Narrator>Can I collect Social Security</v> while I'm still working? Yes, you can work and still collect. But if you start collecting before your Full Retirement Age of 66 or 67, your work income might reduce your monthly Social Security benefit. Why is that? Because Social Security doesn't consider you fully retired if you're earning more than a certain amount called the earnings limit. The limit changes every year. In most cases, the government reduces your monthly benefit by $1 for every $2 you make over that limit, but this cap is only temporary. When you reach Full Retirement Age at 66 or 67, the earnings limit goes away. You get your full benefit even if you're still working. In fact, Social Security increases your monthly payment so that over time, you can recoup the benefits you lost to the earnings limit. What if I'm self-employed? Does it work the same way? Pretty much. There's still an earnings limit but if you're self-employed, the limit is based on just your net income as opposed to your gross income. To learn more, go to aarp.org/socialsecurity. <v ->The video mentioned that Full Retirement Age is 66 or 67.</v> Let's dig into that a little more. Full Retirement Age is 66 for people who were born between 1943 and 1954, and it gradually increases to age 67 for people who were born in 1960 or later. Let's hear from Social Security Thought Leader, Stephen Richardson. Stephen, what are the earnings limits for this year? <v ->All right, if you will not reach Full Retirement Age</v> by the end of this year, you can earn up to this much and collect all your Social Security benefits. But if you earn more than this, Social Security deducts a dollar from your benefit for every $2 you earn over the limit. So for example, let's say you're 65 and started collecting Social Security this year. If you earn this much, you're over the limit and you lose some of your Social Security. To calculate how much is withheld, subtract the limit from your earnings and divide by two. This is how much will be deducted from your Social Security benefits. That's $1 for every $2 you earn over the limit. In the year you reach Full Retirement Age, there's a higher earnings limit. If you reach 66 in four months in this year, you can earn up to this amount this year and collect all your Social Security benefits. If you earned over that limit, Social Security only deducts $1 for every $3 you earn over the limit. And remember, starting the month you reach Full Retirement Age you can earn any amount and still collect your Social Security. <v ->Thanks, Stephen.</v> Social Security always starts by looking at your earnings for January through December, but many people don't start their Social Security in January, so they have a special earnings limit rule if you sign up for benefits later in the year. The special earnings rule lets you collect your Social Security for months that you earn less than a monthly limit, even if you go over the annual limit. That way, what you earned before you start your Social Security doesn't reduce what you can collect after you do sign up. Social Security can only use the monthly earnings rule in one calendar year, usually the first year you sign up for benefits. After that, Social Security pays benefits based on how much you earn for the whole calendar year. If you claim your benefits early and Social Security holds back benefits because you work and earn over the limit, they'll adjust your benefit when you reach Full Retirement Age When you first apply, Social Security reduces your benefit based on the number of months you signed up early. When you reach Full Retirement Age, your permanent reduction is based on the number of months you got to keep your benefit. Let's see if Stephen can help us break this down. Stephen, can you give us an example of how Social Security adjusts your benefits when you reach Full Retirement Age? <v ->Of course.</v> Let's say you signed up 36 months early and Social Security reduced your benefit by 20%, but because you kept working, you only actually got to collect for 18 of those 36 months. In that case, your permanent benefits starting at Full Retirement Age will only be reduced by 10% for the 18 months you got to keep your benefit rather than the 20% for the 36 months when you originally applied. Social Security calls this an adjustment of the reduction factor or the ARF. <v ->Thanks Stephen.</v> Social Security calculates your retirement benefit based on your 35 best years of earnings, adjusted for wage growth. If you have a new year of earnings that is higher than the lowest adjusted year used to calculate your current amount, they replace the old year with the new year and you get an increase in your payment. If your new year is lower, your benefit will just stay the same. Social Security will never replace a higher year with a lower year. If you're under Full Retirement Age, still working, and expected to earn over the limit for the year, you should call the Social Security administration and give them an estimate so that they can hold back benefits while you're still working and have that other source of income. You can change your estimate either up or down any time during the year if your circumstances change. Then at the end of the year, you can call them and give them your exact earnings. If they withheld too much, you'll get a refund. If they didn't withhold enough and you were overpaid, you will need to make up the difference. I know we covered a lot of information in a short amount of time. If you still have questions or need assistance, you can reach out to your local Social Security office by visiting ssa.gov/locator or calling 800-772-1213 and a representative can help you make an informed decision about your benefits. To find clear and comprehensive information about Social Security, check out this website. And for additional information about other Social Security topics and resources, visit learn.aarp.org/socialsecurity. While you're there, be sure to use the Your Questions Answered tool to browse Frequently Asked Questions. If you don't see what you're looking for, you can submit your own question. Volunteer Certified Financial Planner professionals from the Foundation for Financial Planning will answer every question submitted with a personalized response within 10 days via private email. Thanks for watching. (bright music)

Social Security retirement earnings test

Full Retirement Age

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self-employed earnings limit

benefit adjustments