This can be a loaded question that is not as simple as it may seem.The rules have changed over the years and were modified in 2000 to not discourage retirees from working. The fact remains though that if a retiree is receiving Social Security benefits prior to full retirement age and earns more than the maximum amount for the year part of their social security benefits will be withheld.
There are two levels that apply for the “Earnings” test. The first is for wages earned before the retiree has reached full retirement age. For every $2 earned over $15,480 in a year (as of 2014), $1 in future social security benefits will be withheld.
The second level that applies for the “Earnings” test is during the year the worker attains full retirement age but is only applied in the months prior to reaching that FRA. The higher wage threshold applies in this case and $1 is withheld for every $3 earned over $41,400 as of 2014.
After the retiree turns FRA there are no further benefit withholdings. In the instances above those benefits withheld aren’t completely gone for good as a portion of them will be returned during the period the retiree is drawing benefits after FRA.
Brandon M. Smith, LPL Investment
Lifetime Planning, Inc.
Securities offered through LPL Financial,