Social Security benefits provide essential financial support for millions of retirees and people with disabilities. When you receive Social Security benefits and you have not reached full retirement age, the Social Security Administration sets wage allowance limits. As long as your earnings are less than the wage allowance that applies to you, your benefits are not affected. Wage allowances are adjusted annually. The ones used here are for 2011. Check with the Social Security Administration for current figures.
Although you can elect to start receiving Social Security retirement benefits at age 62, your full retirement age is older. If you were born between Jan. 2, 1943, and Jan. 1, 1955, your full retirement age is 66. If you were born earlier, the full retirement age gradually declines to a low of 65. For those born after this period, the full retirement age gradually increases until it reaches 67 years. Wage allowances apply only until you reach full retirement age. After that, you can earn any amount without affecting your benefits.
For 2011, the wage allowance for people receiving Social Security retirement benefits was $14,160, or an average of $1,180 per month. Your benefits are reduced by $1 for every $2 over the wage allowance. For example, if you earned $16,000 in 2011, that was $1,840 over. Your benefits would be reduced by one-half that amount, or $920. However, you eventually get this money back because your benefits will be increased once you reach full retirement age.
Social Security Disability Insurance benefits are paid to people who cannot work because of a disability. The wage limit or allowance for SSDI benefits was $1,000 per month in 2011. For those who are legally blind, the limit was $1,640 per month. When a person starts receiving SSDI benefits, she has a trial period of nine months, which need not be consecutive. A month counts as a trial month if she earns $720 or more, but benefits are not affected regardless of the amount of earnings. Once the trial period is complete, SSDI payments are not paid for any month in which income exceeds the wage allowance limit.
Some people with disabilities do not qualify for SSDI. Supplemental Security Income is a program that provides benefits to these individuals. SSI is administered at the state level in cooperation with the Social Security Administration. Wage allowances are set by individual states, so they vary. If a beneficiary exceeds the wage allowance, benefits are reduced using the same formula used for retirement benefits. That is, the benefit amount is reduced by $1 for every $2 above the wage allowance.