You can keep working and collect Social Security retirement or survivor's benefits at the same time. However, Social Security will reduce your benefits if you earn more than the government's limits before reaching your full retirement age. This age is 66 for workers born between Jan. 2, 1943, and Jan. 1, 1955, and increases for those born later. Although earned income counts toward the limits, other types of income are exempt.
Your gross earnings from employment count toward the earnings limits for Social Security benefits. Social Security counts your wages before any deductions for insurance, Social Security taxes, income taxes, union dues and other expenses. However, special payments for work done before retirement don't count against your Social Security benefits. Common examples of these special payments are sick pay, vacation pay or sales commissions.
The net income you receive from self-employment after business expenses counts toward the earnings limits for Social Security. Self-employment income generally counts in the year you collect it, rather than when you earn it. However, income you earn before starting benefits and collect in a later year is an exception. If it comes in after you start benefits, it counts in the year you receive it.
Offsetting Employment Income
If you are self-employed and also have income from employment, you can offset your wages in some cases. Any net loss from self-employment reduces your income from wages for the Social Security earnings limits.
Income you receive from sources other than work does not count toward the earnings limit. Exempt income includes investment earnings such as interest and capital gains. Pensions and other types of government benefits also do not count toward the earnings limits. However, your contributions to a retirement plan count toward the limits if they are part of your gross income.
Social Security will reduce your benefits by $1 for every $2 you earn over a maximum of $14,640 if you are under full retirement age for the entire year, as of 2012. If you reach full retirement age during 2012, Social Security will reduce your benefit by $1 for every $3 you earn above $38,880, but only until your birthday month. These earnings limits are subject to change. Social Security has different earnings rules for disability benefits or Supplemental Security Income and for people working outside the U.S.
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