Don’t Worry if You Exceed the Social Security Earnings Limit

Working and Collecting SS Benefits - Rebel Retirement

Have you exceeded the yearly Social Security earnings limit? Or think you might?

Don’t worry.

I know from personal experience that returning the money to Social Security is painless and efficient.  And I’m going to explain exactly how it works.

But first,  I’ll give you some background information.

Rebel Retiree began collecting benefits at 62.  Then in the second quarter of 2018, he started working part-time. He anticipated he might go over the annual earnings limit by the end of that year.

What he didn’t know, however, was how long the job would last, or if he would quit before ever reaching the earnings limit.

With that in mind, instead of notifying  Social Security in advance, he decided to play it by ear, go with the flow, and let everything fall into place on its own.

By the end of the year, there was no doubt his earnings exceeded the annual allowable limit. The following January, his W2s confirmed it.

At that time, we weren’t exactly sure how it would be resolved.

I know there can be a certain amount of apprehension when faced with something unfamiliar, especially when dealing with bureaucratic agencies like the Social Security Administration.

And although Social Security’s website is readily available for us to pull up on our devices and is very thorough in its explanations, there are many rules and regulations to digest.

And sometimes it can be overwhelming, if not confusing.

Because we’ve had experience with this situation, I decided to write this article. I hope you find it useful.

SS 2020 Earnings Limit Graphic - Rebel Retirement
The earnings limit for 2022 is $19,560.

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Help! I’ve exceeded the Social Security earnings limit.

If you’re afraid the Social Security Administration will punish you for exceeding the earnings limit, you are not alone.

There are countless other baby boomers in this situation.

In light of that, you may find this story interesting. A question popped up on a Facebook group that I follow. The group is for retirees or those wanting to retire.

A group member had taken early Social Security benefits before full retirement age.  She was working and had exceeded the yearly earnings limit. She wanted to know what happens if you work and make more than the allowable limit.

After contacting her local Social Security office, she found herself more confused than ever before and decided to reach out to the group.

The woman wanted to know if anyone in the group had personal experience with this type of situation.

She worried about:

  • Penalties
  • How to return the money
  • Do you pay the money back directly
  • Do you need to write a check to the Social Security Administration
  • When will benefits resume after SSA withholds the overpayments

A few people replied:

  • Someone recommended that she rethink her situation and suspend her benefits until her full retirement age
  • Another quoted the Social Security Administration
  • People shared links to confusing articles

People tried to be helpful, while others treated her like she had made a mistake in collecting earlier than later.

I could tell from reading her replies, that their answers were unsatisfactory.

I knew that I could help and explained my experience to her.

From the reply she left me, I’m confident that she received the information that she needed.

Now, to detail what happens if you work, collect social security benefits, and earn over the annual earnings limit.

It’s not as complicated as you may think.

What to do if you earn more than the Social Security earnings limit?

Let me say that the Social Security Administration will only contact you by official mail through the United States Postal Service. Unless you initiate phone communication, they will never call you. Having said that,  please understand that all of the examples I share come from communications by mail.

You don’t have to do anything in advance if you work while collecting benefits and expect to exceed the annual earnings limit.

Yes, the Social Security Administration wants you to advise them in advance. However, that isn’t always practical for various reasons. You will not be penalized or pay extra for waiting until you are certain how your particular circumstances develop.

When Social Security receives your W2s and tax returns, they will evaluate your account and make adjustments accordingly.

RR Exceeding Earnings Limit Timeline-Rebel Retirement

What happens if you exceed the annual Social Security earnings limit?

Approximately 6 months after filing our joint tax return for 2018 which claimed earnings from Rebel Retiree’s part-time job, he received a letter from the Social Security Administration.

The letter explained that work and earnings caused a change in his benefit amount. It thoroughly explained the amount of overpayment. And it showed the amount that must be repaid to Social Security.

It stated that X amount of dollars from the September 2019 payment would be withheld in October to recover the overpayment.

As in all tax-related judgments, the letter informed Rebel Retiree of his right to appeal. It also stated his right to request a waiver if:

  • The overpayment was not his fault in any way
  • He could not meet living expenses if they recovered the overpayment
  • If recovery would be unfair for some other reason

All of the figures were accurate and he had no reason to appeal.

We did not pay out of pocket in advance but simply waited for benefits to be withheld.

The overpayment in benefits was satisfied, and regular Social Security benefits returned the following month.

Information blacked out for privacy.

 

Trust the efficiency of the Social Security Administration.

Don’t let the fear of making more than the annual earnings limit stop you from working and claiming your Social Security benefits at the same time.

There are perks to doing so.

As long as you continue to work and collect benefits, the Social Security Administration will check your records annually to see whether your additional earnings will increase your benefit amount.

Yes, that’s right. As long as you put in, your benefits could increase.

However, Social Security has a formula to determine this. And it all depends on your highest-earning years. So, it doesn’t necessarily mean that your benefit amount will increase, but it’s possible. It’s all based on your lifetime contributions. And you best know your circumstances regarding that.

If there is an increase, they will mail you a letter telling you of the new benefit amount.

Additionally, when you reach your full retirement age, they will recalculate your benefit amount and give you credit for any months you didn’t receive a payment because of earnings!

Conclusion

Exceeding the Social Security yearly earnings limit while working can be worrisome – especially if you aren’t familiar with the process. However, the SSA is very efficient in how it handles any overpayment of claims.

  • You are not charged a penalty
  • You do not have to write any checks to Social Security to pay them back unless you want to
  • Benefits resume the month after they withhold benefits due to overpayment
  • After you reach full retirement age, they recalculate your benefit amount to give you credit for any months in which you did not receive a benefit because of your earnings.

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32 thoughts on “Don’t Worry if You Exceed the Social Security Earnings Limit

  1. Frank says:

    I am retired collecting social security and 62 I do not reach full retirement until I’m 67. I have been offered a position that would put me over the current max salary allowed by SS before a 401K contribution. This job offers a 401k plan, and I would put the max of $30k into it annually. Subtracting my 401K contribution that would make my take home salary less than the SS threshold of income. Does my 401k contribution get counted as income by SS if it goes into a 401k account?

  2. Meg Pearson says:

    Hi,
    I am 64 and work part time and collect Social Security. In October I went over the yearly amount of income allowed. I called Social Security and the man asked how much I expected to make for the year. I am a server and it varies, I told him I may make $22,00.00 for the year. That being about $2,500 over the annual limit. He said because I had informed them now they would take the overpayment of penalty of $1,250.oo out of my next Social Security Check. I told him that was terrible as I had not made all that money yet and did not feel I should penalized prior to earning the money. How can they penalize me for money I have yet to make. He said I would get a letter . I wish I had never called. Sounds like if you do not call they wait till the end of the year to view your income. Calling and being up front now means over the holidays I will have almost no social security to live on. I guess being honest and up front is not what to do.
    Help !
    Meg

    • Yoga Woman says:

      Hi Meg,

      Wish I had better news for you. But once you’ve contacted Social Security about expected earnings, I don’t think you have much recourse. We recommend staying silent because nobody really knows if, or how much, they will earn over the limit for the year. It’s only an expectation. At any rate, Social Security finds out how much you’ve earned when you file your taxes. Then, they make the adjustments to benefits. We’re simply recommending kicking the can down the road a bit. Social Security will get the money, regardless. If it’s a hardship for you at this time, you may be able to address that when you receive the letter from them. Here’s a heads-up. They will likely adjust future benefit amounts for 2023 based on 2022. If you won’t be earning as much, let them know.

      Withholding your benefits is a bummer, but it’s not a penalty. There’s an earnings limit and we can only make so much before it affects our benefits. Take heart that this extra money applies to your account and will be returned in higher benefit amounts at full retirement.

      I think you’re taking a great approach by collecting benefits and also working. Let those benefits work for you! /is_it_better_to_take_social_security_at_62_or_wait/

      Thank you so much for sharing your experience with us. It really helps out our other readers. I hope your holidays are merry despite this little blip.

      Best,
      Marlene, Yoga Woman

  3. Kim says:

    Hi I applied for social security in November 2021 . I’m 62 and have other income other than my job . It is a rental income . I was told that does not apply hopefully ! My job I’m still there part time , because my check will not come until January . My question is how will social know if I’ll be over my earnings limit ? I won’t be ,but just curious do they monitor it monthly or yearly ? Because this month I may be over a bit thank you for any help can’t get much help on the phone

    • Yoga Woman says:

      Hi Kim!

      Your rental property doesn’t count as income for purposes of the earnings limit. In our experience, Social Security monitors annually, based on your tax return. I haven’t heard anything otherwise. As a heads up to you, I will say that if you happen to go over the earnings limit they may want to adjust your benefits in the subsequent year, expecting you’ll make the same amount of money. That happened to my husband (after writing this article). However, his situation had changed. He would not earn the same amount of money. Nor would he earn over the annual earnings limit. He notified Social Security, explained his situation, and they corrected the benefit amount. We prefer to take a wait-and-see attitude. Then, be proactive in our dealings with SS. Hope this helps.

      All the best!
      Marlene, Yoga Woman

      • Kim says:

        Thank you !
        Guess what I will be going over the limit . I will call them next week it’s impossible not to go over the limit . I need my health insurance I had to stay on till end of year 🙁

  4. Beth C says:

    I found this article very helpful! I do have a question for my husband who is self employed. He is 63 and considering taking his early SS payments but we are not sure if the income limit would be based on his gross income or his net income annually once all of the write offs are calculated. Do you happen to know? Thank you!

    • Yoga Woman says:

      Hi Beth,

      That’s a great question! And the news is good! If you’re self-employed, Social Security counts only your net earnings from self-employment. Your husband’s write-offs will reduce his gross income. This link will take you to a Social Security PDF. Scroll to page 5, 2nd sentence.

      Thank you so much for stopping by. I’m happy you found this article helpful!

      All the best,
      Marlene, Yoga Woman

  5. Paul says:

    Hello, I just turned 63, born in 1958, FRA is 66 and 8 months. I would like to work until 70 to get the extra 30% on my benefits. I work abroad with a tax free income status of just over 100K., even though my total income is higher. After my FRA, can I can still earn my total income (over the 100K) without any tax penalty? I read you could, but am not sure.

  6. Mary says:

    Thank you for this. Excellent article!

    Although, I have been told a different story by several people from the Social Security office. I called several times, because , it is ludicrous.

    They told me that the gov. does NOT deduct what you go over, from your next SS check.
    Instead, they take the whole check!

    SO, if you go over $100, they take it all!
    Then split up the difference for the duration of our lifetime checks. I figured it would be about a raise of about 0.50$.

    In your letter, they just deducted it, and you got the rest of it. Right away.

    I wonder if this new and improved rule, started last year. I have another year to go.
    Do you have any incite on this? Great website!

    • Yoga Woman says:

      Hi Mary!

      Wish I could be more helpful, but I’m a bit confused as to why Social Security told you that they would take your whole check, unless the full amount is what would be needed to repay an overpayment of benefits. They do spread out your money over time when they owe you and they recalculate benefit amounts – meaning they don’t give you one lump sum. Dealing with these people can be so frustrating at times! Perhaps this is a new rule as you said. I’m so happy you found this article useful.

      Thanks so much and all the best for a happy retirement,
      Marlene

  7. David Wittenauer says:

    I talked to my accountant (Illinois) and told him that I was put on full commission (so I will now make to much money)after I had applied for SS. he said hold out a dollar for every dollar over to pay back to SS. Question: do I keep half my overpayments or do they want it all?

    • Yoga Woman says:

      Hi David!

      I’m happy to answer this question for you. Social Security will expect any and all amounts that you’ve earned over the annual earnings limit to be repaid. When requested, you may want to pay it back yourself. Hence, your accountant’s advice to hold out a dollar for every dollar you earn. We prefer to take a wait-and-see attitude. When Social Security notified us of an overpayment of benefits, David took the option to have Social Security withhold benefits until they recovered the money that was overpaid. After that was fulfilled, his benefits resumed.

      Thanks for stopping by!

      Best,
      Marlene, Yoga Woman

  8. Ed Deforest says:

    I started receiving benefits in August and will continue working until December. How does SS determine the amount of the overage I will earn. Do they look at individual months since I was not collecting all year or does the total annual income count?

    • Deen says:

      Hi Mary, I have had this happen every year since I began receiving survivor benefits in 2017. They suspend full checks never just what I owe. I just work a part time job and I am under fra. One year they withheld 3 full benefit checks for no reason, because by my figures I only owed them less that 700. I have only been “paid” back in June twice. In 2019 they sent me a $7.00 and in 2021 a big improvement, they refunded me $650.00. Now in 2022 I will not receive my check for February. This makes it difficult for a lone widow to buy food and pay bills. Everything I read online says they should only withhold the 1.00 for every 2.00 earned and it should say we will only withhold full checks if you go over earnings test. My situation has not been fair at all. I am dissappointed, but still thankful for the benefit. When I do fully retire I will be hit with the Government pension offset and the windfall elimination provision. Then my benefit will be permanently reduced by two thirds or possibly wiped out completely. I feel a bleak future is in store for my situation and many others. I hope it improves for us all

  9. Paul Virgil says:

    I retired at 62 and I have been receiving SS since June 2020. I am considering going back to work at a lower salary that I used to make before I retired at the beginning of 2022. Salary will be +/- $60,000 a year. This will obviously be way over (40K) the $18,960 limit for 2022 and 2023 even if they increase it by a few hundred each year. I cannot suspend my benefits anymore I am passed the 12 month timeframe and I don’t have the money to repay what I already got. I am sure my benefit will be withheld for 2022 and 2023 as I plan to work till I am 65. My question is will the SSA withhold my benefit until every dollar in excess of the limits for 2022 and 2023 are repaid? If yes, this means I will not receive payments for both years and perhaps a few months after I retire again?

    • Yoga Woman says:

      If you’re collecting benefits and have been paid too much, Social Security will notify you of the overpayment. If you agree, monthly SS benefits will be withheld until the overage is paid. How long depends on your particular circumstance. So, yes, it’s possible you will not receive payments for both years. Perhaps this PDF from Social Security will be helpful. https://www.ssa.gov/pubs/EN-05-10098.pdf

      Thanks for stopping by!

      Best,
      Marlene, Yoga Woman

  10. Billy says:

    My question is this. I want to retire at 62 which is a year from now. My Dr said I could retire then due to disability because of a previous injury that could keep me from working until 67. Can I apply for disability at 62 or would they say no because I made it that far? So if I were to earn $52,000 a year for those 5 years working part time,, (or can I even earn anything if I am on disability) since I cannot retire until 67 because I was born in 1960, how would that work? The extra money I make over the limit, I will get back starting at 67? How do they spread out that extra money? Medicare is expensive insurance to pay each month. Trying to figure out the best route to take. My monthly benefits per my statement would be $1766 a month at 62, $2560 at age 67.
    Thanks,

    • Yoga Woman says:

      Hi Billy!

      Wow! You’ve got quite a few questions. Unfortunately, I am unable to answer all of them for you. The purpose of this article is to give an honest evaluation of our experience with exceeding the SS earnings limit. It’s meant to inspire and give courage to those who are afraid they will be penalized if they work and collect benefits. We’ve found the Social Security Administration to be efficient in its methods for calculating and disbursing benefits. And if you continue to work and collect benefits, the Social Security Administration will check your records annually to see whether your additional earnings will increase your benefit amount at FRA. However, that increase will be in the form of an increased benefit amount, not one lump sum.

      Your best option is to contact Social Security directly with your questions about disability. That’s not our area of expertise.

      Our mission at Rebel Retirement is to write positive and empowering articles to inspire others to retire without worrying about the money. We don’t give financial advice.

      Here are a couple of links to SS that I hope will be helpful How Work Affects Your Benefits, Benefits for People With Disabilities

      Thanks so much for stopping by!

      Good luck, Marlene

  11. Gayle Gardner says:

    Once you retire early, are your locked into that amount for the rest of your life minus COLA or could it be changed at some point? My amount is very low, however, I don’t want to wait due to illness. Also can SS penalize and punish you for earning more than the allotted amount if you work, I need the health insurance, I’m just turning 62?

    • Yoga Woman says:

      Hi Gayle!

      Once you retire at 62 and collect SS benefits, you are locked into that amount unless you continue to work. If you continue to work, your employer will deduct Social Security taxes from your paycheck which will be applied to your account. In turn, this increases your credits. Then, when you reach your full retirement age, Social Security recalculates your benefit amount to reflect the years that you worked after you began collecting at 62. You could get a higher payment. No guarantees, however. That depends on your personal set of circumstances as to what’s in your account.

      However, there’s no way around the earnings limit. If you collect benefits at 62, you will be subject to the annual earnings limit.

      This probably isn’t feasible, but is it possible for you to arrange part-time work with your employer to stay within the limit and still receive some kind of health insurance?

      It’s a shame health care is so expensive! I wish my answer was more positive. Take care of yourself!

      All the best,
      Marlene

  12. Rich P. says:

    If you read my annual SS statement we should all receive, it states “In other words, if you would like to work and earn more than the exempt amount, you should know that it would not, ON AVERAGE, reduce the total value of lifetime benefits you receive. My question is do you get the amount of benefits withheld all at once at full retirement age?Or do they divide them up over several years? Thanks, Rich

    • Yoga Woman says:

      Hi Rich!

      What a great question! I wish I could say that Social Security repays those benefits immediately at full retirement age. However, you won’t get the funds in one lump sum. Your monthly benefit amount will be increased, meaning you will get the money back over time. Here’s how SS states that it works. “Your benefit will increase at your full retirement age to account for benefits withheld due to earlier earnings.” Hope this answered your question. Thanks for stopping by!

      Best, Marlene

  13. Doug B says:

    I’m wondering about a scenario in which someone might earn well in excess of their SS benefit. Is it possible the whole SS benefit might be withheld, and if so, would the SS benefit increase as if it hadn’t been taken until later in life. For example, to preserve the approximate 8% per year increase.

    • Yoga Woman says:

      Hi Doug!

      If someone earns well in excess of the SS earnings limit, I think it’s possible that the whole SS benefit may be withheld in a subsequent year. That’s because whatever was paid out over the earnings limit must be repaid. However, SS does adjust benefit amounts based on highest year’s earnings. Each individual circumstance is different. Therefore, I can’t say whether or not it would match the 8% per year increase if one waits to collect. Here’s a link to Social Security which describes how earnings affect benefits. Our mission is to encourage people to collect early and invest in themselves.

      Best,
      Marlene, Yoga Woman

  14. Pam Norton says:

    I enjoyed this article. I know the Earnings Cap for 2021 is $18,960. I am turning 65; laid off earlier in 2021; collecting unemployment, not collecting social security. If I take a job and contribute to my 401k plan, does Social Security calculate your earned income minus contribution? Let’s say I was earning $40,000 and contributed 10,000 to a plan would SS say my earned income was 40K or 30K? Or does SS have a rule that says you can’t do this to lower income so as not to exceed Earnings Cap?

    • Yoga Woman says:

      Hello Pam!

      That’s a great question! Social Security counts your gross income before contributions. Therefore, if you earn $40,000 and contribute $10,000 to your 401K plan, they calculate your income at 40K. Check out page 4 of this PDF from the SSA on how work affects your benefits. It explains what income counts and when they count it. Thanks so much for stopping by! Hope this helps. Good luck!

      Best,
      Marlene

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