Maximum Income for People With Social Security

If Social Security doesn't provide enough money to support you in retirement, you'll need other sources of income, such as a job, investments or a retirement plan. Depending on your age and the amount of your non-Social Security income, those other sources might cause Social Security to reduce your benefits -- or the Internal Revenue Service to tax them.

Benefit Reduction

If you're working at the same time you're receiving Social Security benefits, your benefits might be reduced, at least temporarily. It depends on two things: your age and how much money you make from work. Every worker has what Social Security refers to as a "full retirement age," which ranges from 65 for people born before 1938 to 67 for people born after 1959. You can begin getting Social Security benefits at age 62, but your monthly benefit is smaller than if you wait until full retirement age. Once you reach your full retirement age, you can earn an unlimited amount of money from work without any reduction in your benefits. If you have not yet reached that age, though, you'll begin to lose benefits above a certain amount of income.

Maximum Income Without Reduction

At the time of publication, if you are younger than your full retirement age, you can earn a maximum of $14,160 a year from work without any reduction in your benefits. Above that maximum, Social Security withholds $1 from your benefits for every $2 you earn. The maximum increases dramatically in the year you reach full retirement age. You can earn a maximum of $37,680 in that year without any reduction in benefits, with Social Security withholding $1 for every $3 you earn over the maximum.

Benefit Reduction Details

In figuring whether to reduce your benefits, Social Security counts only earned income from work. Income from pensions, investments and other sources doesn't apply toward the maximum. Moreover, although earnings above the maximum reduce your benefits, Social Security eventually "gives you your money back" by increasing your monthly benefit once you reach full retirement age. The amount of the increase is calculated so that -- based on average life expectancy -- you are likely to recover the full amount that was originally withheld.

Taxable Benefits

If Social Security benefits are your only source of income, you shouldn't have to worry about income taxes, because you probably won't owe any. However, if you're pulling in income from other sources -- such as work, pensions or investments -- then you might have to pay taxes on up to 85 percent of your benefits. To determine whether you might owe taxes, take one-half of your Social Security benefits for the year and add in all your other taxable income plus any tax-exempt interest. If the result exceeds the threshold amount set by the Internal Revenue Service, then your benefits might be taxable. As of 2011, the threshold amounts were $25,000 for single people, $32,000 for married couples filing jointly and $0 for a married person filing separately. If you exceed the threshold, see IRS Publication 915 to calculate your tax responsibility.

Maximum Income for Taxable Benefits

The maximum income you can have without paying taxes on your Social Security benefits depends on the amount of your benefits. Say you're single and your benefit is $1,500 a month. That's $18,000 a year, and one-half of that is $9,000. Therefore, you can have a maximum of $16,000 in other income before you may have to pay taxes on your benefits. If you're married, and you and your spouse receive a combined $2,250 a month in benefits, that's $27,000 a year, and half of that is $13,500. You could have a maximum of $18,500 in other income before taxes become a possibility.


About the Author

Cam Merritt is a writer and editor specializing in business, personal finance and home design. He has contributed to USA Today, The Des Moines Register and Better Homes and Gardens"publications. Merritt has a journalism degree from Drake University and is pursuing an MBA from the University of Iowa.