The Social Security Earnings Test

Will you be subject to the Social Security earnings test? If so, it can cause a reduction in your benefits.

The Social Security earnings test is an important aspect to consider as one plans for federal retirement. Social Security states that those individuals who have earned at least 40 credits may be eligible for a benefit. However, before choosing to work after retirement, it is important to determine if a retiree may be subject to the Social Security Earnings Test.

Many federal employees retire before they reach their full retirement age for Social Security and begin employment in the private sector to supplement their retirement income. This could cause a reduction or loss of their Social Security benefit due to the earnings test.

Minimum Retirement Age for Social Security

If you were bornYour MRA is
Before 194855
In 194855 and 2 months
In 194955 and 4 months
In 195055 and 6 months
In 195155 and 8 months
In 195255 and 10 months
In 1953-196456
In 196556 and 2 months
In 196656 and 4 months
In 196756 and 6 months
In 196856 and 8 mo
In 196956 and 10 mont
In 1970 and after57

Earnings Test

According to the Social Security earnings test limit for 2021, if one draws Social Security before reaching full retirement age (FRA), this individual is subject to the annual earnings test limit of $18,960. For every $2 of earned income over the earnings test limit, Social Security will withhold $1 of the retiree’s benefit. In the year one reaches full retirement age, the annual limit increases to $50,520 and $1 will be withheld for every $3 over this higher limit. The earnings test vanishes completely once one reaches full retirement age.

Earned Income

It is important to remember that only earned income is considered for the limit. To determine how earned income is calculated for this limit, refer to the box below.

Sum of pay for services as an employee
+All net earnings from self-employment
Any net loss from self-employment from that year
=Earned income

For more information on the earnings test and other helpful Social Security information, please watch our video below.

About the Author

Brandon Christy, CPA, PFS, is the founder and president of Retirement Benefits Institute, Inc. He is an established leader in contracted federal retirement benefits education, and his company has trained over 10,000 federal employees to help them gain clarity and confidence in retirement.