Earnings Limit for Beneficiaries Under the Full Retirement Age

Background

Social Security rules limit the amount of earnings a worker can make while maintaining full benefits. In 2021, workers under full retirement ageThe earliest age at which people can receive unreduced Social Security retirement benefits. (FRA) who receive Social Security benefits and earn above $18,960 face some reduction in benefits. Benefits are reduced by $1 for every $2 earned over that threshold. Workers who receive reduced benefits because of the earnings limit will receive increased benefits once they reach the FRA. On average, over a person’s lifetime, the increase in benefits will offset the reduction due to the earnings limit.

Some policymakers advocate raising or eliminating the earnings limit for those younger than the FRA. This could induce some individuals who have already claimed Social Security benefits early to remain in the workforce. Or they might work additional hours. It could induce workers between age 62 and full retirement ageThe earliest age at which people can receive unreduced Social Security retirement benefits. to begin claiming Social Security benefits because there is no longer a penalty for receiving benefits while working.

EARNINGS LIMIT FOR BENEFICIARIES UNDER THE FULL RETIREMENT AGE: Policy

EARNINGS LIMIT FOR BENEFICIARIES UNDER THE FULL RETIREMENT AGE: Policy

Altering the earnings limit

Policymakers should change or eliminate the Social Security earnings limit only if the Social Security trust funds can be maintained. Any change should guarantee there would be no adverse impact on the financial well-being of retirees or their spouses over the short and long terms.