How Much Can I Earn Without Losing Social Security Benefits?

••• Comstock Images/Comstock/Getty Images

Social Security estimates that 96 percent of workers in the United States pay Social Security or FICA taxes with the intent of collecting retirement benefits. Many workers become eligible for Social Security benefits while still receiving earned income. If the worker has not reached full retirement age, they could face penalties for money earned through a job. In 2011, an eligible worker can earn up to $14,160 before facing penalties.

Full Retirement Age

Full retirement age has changed over time, and those born in 1942 reached full retirement age at 65. Workers born between 1943 and 1954 must work until 66 to reach full retirement age, and workers born after 1955 will need to work until 67 for full retirement age. If you retire before full retirement age, you are subject to penalties imposed by the Social Security Administration.

Social Security Penalties

Social Security allows the worker to earn income in any amount, but imposes a penalty on workers who take early benefits. If you choose to retire before full retirement age, or take survivors benefits before your full retirement age, Social Security imposes a penalty on your earned income over $14,160 in 2011. The penalty for early retirees is $1 for every $2 earned over $14,160.

Full Retirement Year

In the year you reach full retirement age, Social Security applies more liberal penalties to earnings. A worker may earn $37,680 in 2011 before facing a penalty if it is the year the individual reaches full retirement age. If the worker earns more than $37,680 the year he reaches full retirement age, Social Security takes $1 for every $3 earned over the income limit. No penalty applies when you reach the month of your birthday in the year you reach full retirement age. Social Security recommends that you notify it of your intent to retire in the year of your full retirement age to determine the best month for you to retire.

How a Penalty Affects You

You lose the benefits when you earn income beyond the limits, but if you are subject to a penalty, Social Security will recalculate your benefits at full retirement age. Once you reach full retirement age, if you have incurred significant penalties, you should see an increase in your Social Security benefits for all months after you reach full retirement age. So, the benefits are not actually lost; Social Security delays them because of your income. Once you reach full retirement age, you can earn any amount of income without penalty.