How Much Can You Make on a Job & Still Draw Social Security Without Being Penalized?

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Some people get bored in retirement and go back to work. Others find Social Security is not enough to pay their living expenses and go back to work. Working while drawing Social Security is not a problem, though certain age groups need to monitor their earnings. Younger retirees who earn over a predetermined limit may be penalized for making too much money.

Unlimited Earnings

People who are at full retirement age can make as much money as they want and not be penalized by Social Security, the agency’s website notes. Full retirement age is based on the year you were born. For people born before 1943, the full retirement age is 65 years. For those born between January 2, 1943, and January 1, 1955, the full retirement age is 66. The full retirement age increases gradually to 67 years between January 2, 1955, and 1960, Social Security says.

Early Retirement

People can retire at whatever age they want, but Social Security won’t pay benefits unless they are at least 62 years old. Retirees who retire before reaching Social Security’s full retirement age who work are the ones who need to monitor their earnings. Social Security allowed these retirees to earn up to $14,160 in 2010 before applying penalties to their earnings. The agency deducts $1 for every $2 you earned above $14,160 if you were less than your full retirement age for all of 2010. Social Security deducts $1 for every $3 earned above $37,680 for beneficiaries who will reach full retirement age in 2010. Social Security periodically adjusts the earnings limit.

Benefits to Working

Retirees who work while drawing Social Security benefits could see higher monthly payments down the road, the federal agency says. Social Security recalculates benefits for working retirees annually. Benefits are based on a retiree’s highest earning years. If a retiree earns enough to knock out a lower year, his benefits will be increased, Social Security says.

Delayed Retirement Bonus

People who continue working beyond their full retirement age without drawing Social Security benefits will get higher benefits than if they retired when they reached full retirement age. Social Security says it will increase your monthly benefit by a percentage each month. The percentage varies by birthday, but Social Security says, for example, the amount is eight percent for each year you delay applying for benefits beyond your full retirement age for retirees born in or after 1943.

Income Taxes

Income earned by retirees who work may be subject to taxation by the Internal Revenue Service. Retirees should consult with either the IRS or a financial planner about this.