Can a 66-Year-Old Retiree Have Unlimited Earnings Without Paying Social Security Benefits?

When figuring your financial position in retirement, especially if you plan to work after you access your Social Security benefits, you need to know your projected tax liability and your earning limits before a reduction in benefits occurs. The Internal Revenue Code sets the standard for tax liability. The Social Security Administration (SSA) applies a formula based on your normal retirement age when figuring a decrease in benefits.

Social Security Tax

If you earn wages or make a profit in excess of $400 from self-employment, you must pay Social Security and Medicare taxes, no matter your age. In addition, your employer must pay the employer share of both taxes. As a self-employed person, you are required to pay both the employer and the employee tax percentages. The IRS refers to this as the self-employment tax.

Increase in Benefits

If you work and continue to pay into the Social Security system, you may see an increase in your retirement check amount, even if you have already accessed your benefits. If your earnings after retirement come to more than the amount the agency used to figure your retirement benefit, the SSA will recalculate your benefit based on the new figure and increase your check accordingly. Generally, the agency completes all such calculations by September of the year following your completed year of work. Any increase will be retroactive to January.

Benefit Reduction

You may experience a reduction in your Social Security check if you work after tapping your retirement benefits. As of July 2011, if you are under normal retirement age, the annual earnings limit stands at $14,160. For every additional $2 you earn, the SSA deducts $1 from your benefit check. If you have reached normal retirement age, the agency will make no deduction, thanks to the Senior Citizens’ Freedom to Work Act of 2000, which allows uncapped earnings for those who receive Social Security benefits and have reached normal retirement age.

Normal Retirement Age

Those born before 1938 attained normal retirement age at 65. Beginning with those born in 1938, the normal retirement age began increasing. Normal retirement age became 65 years and 2 months for those born in 1938. From 1939 until 1942, normal retirement age increased by 2 months each year. From 1943 until 1954, normal retirement age stalled at 66. Beginning with those born in 1955, normal retirement age started increasing by 2 months each year until 1959. For those born from 1960 on, normal retirement age is 67.


About the Author

Cheryl Withrow is a writer in Michigan’s untamed Upper Peninsula. Following a teaching career she served alternately as editor of the "Washington County News" and the "Geneva County Reaper," and as associate editor of "Bay Life" magazine. Withrow holds a Bachelor of Science in business with a major in accountancy from Wright State University and a Bachelor of Arts in English from Ohio University.