Woman earns $60,480 but claims Social Security at 62, SSA can withhold her full benefits. Here's the math

Social Security rules are pretty complex to follow, especially when it comes to earnings limit and the full retirement age (FRA) which is 67 for people born in 1960 or later. For instance, there is an earnings limit before FRA, during the year when you reach FRA, and after FRA. Also, under SSA rules, your benefits also differ if you claim benefits before you reach FRA. But what happens if you don't claim anything? Also what if you still work after the FRA age? Here's an explainer.

What is the yearly earnings limit of SSA

SSA has a earnings limit of $24,480 beyond which it withholds $1 for every $2 you earn. This applies only when you are younger than full retirement age. However, in the year you reach full retirement age, SSA withholds $1 for every $3 you earn above $65,160. SSA explained that it only counts " your earnings up to the month before you reach your full retirement age, not your earnings for the entire year." So once the FRA month arrives, the test no longer applies.

What if you retire early?

According to SSA's website, for persons born in 1960 or later the retirement age is 67. They can technically stop working by 62 and claim SSA benefits. However, in that case, their benefits will reduce by 30 per cent.


Here's how it works.

For instance, a 64-year-old woman who started claiming Social Security at age 62 - the minimum age to claim standard retirement benefits. Suppose her full retirement age benefit would have been $2,000 per month, but claiming at 62 reduced her benefit by 30%, leaving her with $1,400 per month.

Now suppose she earns $60,480 from work in 2026. Because she is still below FRA, the Social Security earnings test applies. The 2026 earnings limit is $24,480. Her earnings exceed the limit by $36,000: $60,480 - $24,480 = $36,000

Under the earnings test, the SSA withholds $1 in Social Security benefits for every $2 earned above the limit. That means her potential benefit withholding would be: $36,000 ÷ 2 = $18,000

Since her annual Social Security benefit is $16,800, the calculated withholding is large enough to eliminate all of her benefit payments for that year.

However, the withheld benefits are not necessarily lost permanently. When she reaches FRA, the SSA recalculates her benefit to account for months in which her benefits were reduced or withheld because of the earnings test.

This recalculation can increase her monthly benefit for the rest of her life. The exact increase depends on her claiming history and the number of months in which her benefits were affected.

What happens if she doesn't claim anything till FRA?

If she doesn't claim Social Security at 62 and waits until her FRA of 67, the situation is much simpler — and there is no earnings-test withholding. She can continue working and earning $60,480 without Social Security withholding any of her retirement benefit, because she isn't receiving retirement benefits yet. When she reaches 67 and claims, she would generally receive her full $2,000/month FRA benefit, assuming that $2,000 remains her calculated benefit based on her earnings record. This means she will get $24,000 every year ($2,000 × 12) after FRA.

Aslso SSA generally offers 8% for each full year after FRA until 70 for delayed retirement credits. So if the woman does not claim benefits even after turning 67, she might get roughly $2,160/month at 68, or $2,320/month at 68 or about $2,480/month if she starts claiming benefits at 70.