How does income affect social security benefits

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Now Reading:. Membership My Account. Rewards for Good. Share with facebook. Share with twitter. Share with linkedin. Share using email. Your Social Security benefits are determined by a number of factors, but your earned income over the course of your working life is probably the most important—so the more the better. Is Social Security considered earned income? The Social Security Administration SSA keeps a record of your earned income from year to year, and the portion of your income that is subject to Social Security taxes is used to calculate your benefits in retirement.

The more you earn while working and the more you pay into the Social Security system through payroll or self-employment taxes , the higher your monthly benefit will be, up to a certain maximum. If you paid into the system for more than 35 years, then the Social Security Administration uses only your 35 highest-earning years and does not include any others in its formula. The FRA for anyone born from to is For people born after , the age rises by two months annually until it hits 67 for anyone born in or later.

The age at which you start collecting your Social Security benefits is another important factor. Currently, you can begin receiving benefits as early as age However, your benefits will be permanently reduced unless you wait until your FRA. If you plan to work in retirement and also collect Social Security benefits, then some of your benefits may be temporarily withheld based on your income. Starting with the month when you attain FRA, your benefits will no longer be reduced.

Note that these dollars are not lost forever; instead, your Social Security benefit will be increased to account for them after you reach your FRA. Your income from Social Security can be partially taxable if your combined income exceeds a certain amount.

Internal Revenue Service. Social Security Administration. Accessed Oct. Earnings made as an employee, net earnings from self-employment, and work-related bonuses and awards count toward the limit. The earnings cap goes away after full retirement age — from then on, income level has no effect on Social Security benefits.

Find the answers to the most common Social Security questions such as when to claim, how to maximize your retirement benefits and more. You are leaving AARP. Please return to AARP.

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