How Much Can You Make On Social Security In 2022

Social Security Payments Will Increase By 59%

Even if you are receiving Social Security benefits, you can still have a job and earn an income. But this is not as simple as you may think there is a limit on your monthly payment to continue to qualify for S.S. benefits.

In 2022 Social Security payments have a growth of 5.9%, so you must be careful not to fail to comply with any regulations to continue with the collection. Having a monthly income is a plus for your retirement earnings, but you must be careful not to exceed the limit.

How Much Social Security Will I Get

Every year you work, a portion of your income goes toward Social Security payroll taxes. By the time you retire, you could have paid thousands of dollars into Social Security. But how much will you get every month after you retire?

This guide breaks down how Social Security works plus how to estimate your monthly Social Security benefits.

Key Takeaways

• Social Security benefits might replace pre-retirement salary and can be an important part of retirement plans.
• Benefits depend on factors like date of birth, years worked and earnings history.
• The Social Security Administration calculates total benefits by adjusting past earnings for inflation, generating an average monthly income and putting that number into an insurance formula.

Should I Still File My Tax Return Even If I’m Technically Not Required To

The biggest reason to file a tax return even if you aren’t required to is to receive a tax refund.

If you had federal tax income withheld from your pay or if you made estimated tax payments in 2022, you may want to file a tax return this year. You could receive a tax refund of any surplus withholding.

Another circumstance where filing is encouraged is if you qualify for tax credits that provide you with refunds, including the earned income tax credit, the child tax credit or the child and dependent care tax credit.

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Or Go All The Way And Work Until 70

The longer you hold off receiving your Social Security benefits, up to age 70, the bigger your check. So each month after youve reached your FRA, your payout increases by roughly 0.7% percent , which amounts to 8% per year. If you wait till age 70 then, your payments will be 32% bigger than if you had started taking benefits at 66. Once you turn 70 though, there is no added benefit in postponing payments.

Of course, working until 70 isnt for everyone, and theres no penalty in claiming your benefits when you reach your FRA. At that time, you will receive 100% of your benefit. Its also not a sure thing that waiting until 70 maximizes your lifetime benefit. After all, should you pass away the following year, waiting that long will mean you received far less total benefits than if youd claimed them as soon as you were eligible to. So consider your life expectancy as you make this decision.

What If You Exceed The Ssd Monthly Income Limit Temporarily

Receiving Social Security Disability benefits may suggest that someone is too disabled to do any work. Thats simply not true. The measure to continue to be eligible for SSD benefits is whether a person can earn more than the monthly SSD income cap. Many worthy, qualified, eligible disabled SSD beneficiaries work or earn income part-time, but their income remains beneath the monthly maximum limit.

But what do you do if your part-time job is in a retail store where you earn more during the holiday shopping season?

Do you lose your SSD benefits if you exceed the monthly income cap for two or three consecutive months? During the month or more in which you earn more income than the SSD regulations allow to remain eligible for SSD benefits, you do normally lose the payment for those months. If a retail worker earned more than the income limit in November, December, and January, but then either got laid off or had their hours reduced to a level bringing their income under the SSD income cap, then they would immediately regain SSD benefit eligibility.

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Fact #: Social Security Provides A Foundation Of Retirement Protection For Nearly All People In The Us

97% of older adults either receive Social Security or will receive it.

Almost all workers participate in Social Security by making payroll tax contributions, and almost all older adults receive Social Security benefits. In fact, 97 percent of older adults either receive Social Security or will receive it, according to Social Security Administration estimates.

The near universality of Social Security brings many important advantages. It provides a foundation of retirement protection for people at all earnings levels. It encourages private pensions and personal saving because it isnt means-tested it doesnt reduce or deny benefits to people whose income or assets exceed a certain level. Social Security provides a higher annual payout than private retirement annuities per dollar contributed because its risk pool is not limited to those who expect to live a long time, no funds leak out in lump-sum payments or bequests, and its administrative costs are much lower.

Universal participation and the absence of means-testing make Social Security very efficient to administer. Administrative costs amount to only 0.6 percent of annual benefits, far below the percentages for private retirement annuities. Means-testing Social Security would impose significant reporting and processing burdens on both recipients and administrators, undercutting many of those advantages while yielding little savings.

Social Security Benefits Are Based On Your 35 Highest

The actual calculation to determine your Social Security monthly benefit is rather complex, but basically it’s determined by your 35 highest-earning years, adjusted for inflationup to the maximum taxable amount each year.

This ends up putting a cap on the maximum monthly benefit anyone can receive. The monthly max at FRA in 2022 is $3,345. Then, of course, if you wait to collect beyond your FRA, you earn delayed retirement credits, up to age 70, which will increase your monthly payment.

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‘s 59% Cola Is The Largest Since 1982

Every October, the Social Security Administration announces its annual changes to the Social Security program for the coming year. Below is our summary of the Social Security changes that were announced in October 2021 and are set to take effect on Jan. 1, 2022.

Can You Collect Social Security At 62 And Still Work

Yes, you can work after you start collecting Social Security retirement benefits, no matter what your age. But, if you claim early retirement benefits at age 62 and continue to work, be aware that the money you earn over a certain amount each year may reduce your Social Security retirement benefits . This reduction in benefits applies only to the years you’re working. It doesn’t have a permanent effect on the amount of benefits you’ll receive in future years . So you can earn any amount at age 62, but it might cause a reduction in your benefits.

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Work Until Full Retirement Age

Another step you can take to maximize your Social Security benefits is to work until your full retirement age . Originally, this number was set at 65. But it has been steadily creeping up, thanks to the passage of the Social Security Amendments of 1983 . Starting in 2000, the full retirement age has been increasing in two-month increments so that its 67 for people born in 1960 or later.

If you dont wait till your FRA, the earliest you can start receiving Social Security is 62 years old. However, your benefit will be reduced by up to 30% if your FRA is 67 in this case.

What Income Is Included In Your Social Security Record

Only earned income, your wages, or net income from self-employment is covered by Social Security. If money was withheld from your wages for Social Security or FICA, your wages are covered by Social Security. This means you are paying into the Social Security system that protects you for retirement, disability, survivors, and Medicare benefits.

Pension payments, annuities, and the interest or dividends from your savings and investments are not earnings for Social Security purposes. You may need to pay income tax, but you do not pay Social Security taxes.

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Your May Have To Pay Taxes On Social Security Benefits

Most people know that Social Security is funded by a tax on earnings, currently 6.2% for the employee . But some retirees dont realize that you may well have to pay income tax on Social Security benefits when it comes time to claim them. Benefits lost their tax-free status in 1984, and the income thresholds for triggering tax on benefits havent been increased since then.

It doesnt take a lot of income for your Social Security benefits to be taxed. Your benefits wont be taxed if your provisional income is less than $25,000 if youre single or $32,000 if youre married. If youre single and your provisional income is between $25,000 and $34,000, or married filing jointly with provisional income between $32,000 and $44,000, up to 50% of your Social Security benefits may be taxable. If your provisional income is more than $34,000 on a single return or $44,000 on a joint return, up to 85% of your benefits may be taxable.

The Social Security Administration says about 40% of beneficiaries pay taxes on their benefits. Since the thresholds arent adjusted for inflation, the number of beneficiaries who pay taxes on Social Security benefits increases every year. The Social Security Trustees annual report estimates that taxes on Social Security will total $45.1 billion in 2022, up from $34.5 billion in 2021.

You may also have to paystateincome taxes on your Social Security benefits. See our list of the 12 States That Tax Social Security Benefits.

Social Security Income Limits For 2022

Heres how much Social Security will deduct from your earnings if you work while collecting Social Security before your FRA:

If you are under full retirement age for the entire year, Social Security will deduct $1 from your benefit payments for every $2 you earn above the annual limit.

For 2022, that limit is $19,560.

In the year you reach full retirement age, Social Security will deduct $1 in benefits for every $3 you earn above a different limit.

In 2022, this limit is $51,960.

The limit changes every year, similar to the changes in COLA.

The table below provides a summary of the earnings limit:

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What To Do If Your Benefits Are Already Being Withheld

If youre subject to the Social Security earnings limit, dont wait for the SSA to start reducing the benefit you receive. Instead, Id recommend voluntarily suspending benefits.

If you wait for the Social Security Administration to discover that youve earned too much working while receiving benefits, your risk of an overpayment notice is higher.

Either way, you arent missing payments that youll never get back. Your benefit amount will be recalculated at your full retirement age to reflect the months that benefits were withheld.

The best way to avoid the earnings limitation is to wait until full retirement age to file for benefits. If you cant wait, make sure you have a clear understanding of how working impacts your Social Security benefits.

If you still have questions, you could leave a comment below, but what may be an even greater help is to join my . Its very active and has some really smart people who love to answer any questions you may have about Social Security. From time to time Ill even drop in to add my thoughts, too.

You should also consider joining the nearly 400,000 subscribers on my YouTube channel! For visual learners , this is where I break down the complex rules and help you figure out how to use them to your advantage.

What If Your Earnings Are Falling Short

If you’re earning enough to reach the maximum benefit amount, that’s fantastic. But the average worker will struggle to reach the income limits, and not everyone can afford to work 35 years before claiming.

The good news is that if you’re willing and able to delay benefits past age 62, you can earn closer to the maximum benefit amount.

Say, for example, you have an FRA of 67 years old, and by claiming at that age, you could receive $1,600 per month. If you were to claim early at 62, your benefits would be reduced by 30%, leaving you with $1,120 per month. But if you delay benefits until age 70, you’d receive your full benefit amount plus an extra 24%, or $1,984 per month.

Not everyone will be able to wait until age 70 to file for benefits. But if you’re unable to reach the maximum benefit amount, delaying Social Security is one of the best and easiest ways to boost your benefits.

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Social Security Income Limits After Full Retirement Age

Youve learned how working before full retirement age affects your benefits, including during the year in which you reach full retirement age. So, what happens to your Social Security payments once you finally reach full retirement age? Will working still continue to reduce your payments? The answer is no! Beginning in the month in which you reach full retirement age, your benefits will no longer be affected by working. There is no limit to the amount you can earn, and there will be no reduction to your benefits. Even if you earn over $100,000, you will still receive your maximum benefit during the year.

In addition, the Social Security Administration will recalculate your benefit payment to account for the previously withheld benefits. You will get credit for the months that your benefits were reduced or withheld. You should also know that the Social Security Administration has aspecial rule for the earnings limit that applies to retirees whose earnings will be over the limit for the year but who will only receive benefits for part of the year. They will pay full benefits for any whole month during which you are retired, regardless of your annual income. Plus, even though your benefits will no longer be reduced after reaching FRA, your benefits might become taxable if your earnings for the year are too high.

Can I Work Full Time At 66 And Collect Social Security

When you reach your full retirement age, you can work and earn as much as you want and still get your full Social Security benefit payment. … In addition, as long as you continue to work and receive benefits, we’ll check your record every year to see whether the extra earnings will increase your monthly benefit.

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You Forfeit Up To 30% Of Your Benefits By Claiming Early

The full retirement age is 67, but if you claim at 66 and 11 months, youll receive only 99.4% of your full payment. If you claim at 65, youll receive just 86.7% of your benefits. You can claim as young as 62, but if you do, youll receive only 70% of your full payment for life, if you dont withdraw your claim within a year.

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Social Security Income Limit Summary

Heres the bottom line:

If you collect Social Security early, say at 62, and earn income from work that exceeds the income limit, Social Security will deduct $1 from your benefit payments for every $2 you earn above the annual limit.

For 2022, that limit is $19,560.

In the year you reach full retirement age, Social Security will deduct $1 in benefits for every $3 you earn above a different limit.

In 2022, this limit on your earnings is $51,960.

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Continuing To Work Past Your Fra Could Increase Your Benefitsdepending

So will your monthly benefit go up if you continue to have earned income? That might be the case if your current salary is higher than one of your 35 highest-earning years to date. Here are a couple of examples.

First, let’s say that you earned the maximum taxable income each of those 35 years. If so, you’re already entitled to the maximum benefit. So while there may be a lot of other positive reasons for continuing to work, it won’t get you a higher monthly Social Security payment.

But now let’s say you earned less in the early part of your career and earnings in one or more of those years were lower than the maximum annual taxable income. If what you’re earning now is higher than what you earned in one of your past 35 highest-earning years that have been indexed for wage inflation, your current higher income will replace one of the lower-earning years.

Since Social Security benefits are recalculated yearly, this added income could result in a higher monthly payment. But because there are 35 years of income included in the calculation to determine income over your remaining life expectancy from Social Security, you may not see much of a difference in your monthly payment. Fortunately, Social Security payments are adjusted for inflation, so every little increase can add up over time.

Simplifying Your Social Security Taxes

During your working years, your employer probably withheld payroll taxes from your paycheck. If you make enough in retirement that you need to pay federal income tax, then you will also need to withhold taxes from your monthly income.

To withhold taxes from your Social Security benefits, you will need to fill out Form W-4V . The form only has only seven lines. You will need to enter your personal information and then choose how much to withhold from your benefits. The only withholding options are 7%, 10%, 12% or 22% of your monthly benefit. After you fill out the form, mail it to your closest Social Security Administration office or drop it off in person.

If you prefer to pay more exact withholding payments, you can choose to file estimated tax payments instead of having the SSA withhold taxes. Estimated payments are tax payments that you make each quarter on income that an employer is not required to withhold tax from. So if you ever earned income from self-employment, you may already be familiar with estimated payments.

In general, its easier for retirees to have the SSA withhold taxes. Estimated taxes are a bit more complicated and will simply require you to do more work throughout the year. However, you should make the decision based on your personal situation. At any time you can also switch strategies by asking the the SSA to stop withholding taxes.

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