Which Incomes Reduce Social Security Benefits?

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Social Security recipients paid into the program during their working years and have vested rights to benefits. However, certain other types of income offset Social Security benefits. Congress legislated offsets when it believed other income created excessive benefits for some beneficiaries.

Wages and Retirement

Beneficiaries who elect early retirement, as early as age 62, are subject to earnings limits. The Social Security Administration deducts $1 for every $2 of gross wages or net profit from self employment above the limit--$14,160 in 2010. The limit becomes $37,680 in the year the retiree reaches full retirement age, 66 for persons born January 2, 1943, through January 1, 1955. For example, a recipient age 66 in June 2010 can earn $37,680 January through May without losing benefits. After June and continuing, the beneficiary has no limit on earnings.

Government Pensions

If a government employee’s government pension plan did not participate in Social Security, his government pension reduces Social Security benefits. Under the Windfall Elimination Provision, Social Security uses a different formula that creates a reduced Social Security benefit based on her own earnings. Government Pension Offset affects Social Security benefits received as the spouse or former spouse of a person who worked under Social Security. Two-thirds of the government employee's government pension offsets these Social Security benefits.

Worker's Compensation Offset

Social Security reduces disability benefits when workers receive worker’s compensation because of job-related injuries or illnesses. Public disability benefits provided by many states may also reduce Social Security disability. Social Security reduces benefits so that combined income from compensation or public disability benefits and Social Security disability does not exceed 80 percent of the worker’s highest average current earnings.


About the Author

Jane Amar received a Bachelor of Arts in Spanish language and literature from the University of California in Riverside in 1970. After more than 37 years in government service in management and technical positions, she retired and began her writing career. Since 2007 she has written online content in English and Spanish for profit and nonprofit services and individual entrepreneurs.

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  • 100 dollar bill in pieces image by Artsem Martysiuk from Fotolia.com