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Understanding Social Security: I want to file for Social Security before my full retirement age. What are the income limitations?

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The earnings limit that Social Security applies when you are receiving retirement benefits prior to your full retirement age can reduce your future benefits. This limitation causes lots of confusion, as evidenced by the below email we recently received:

Hi, my birthday is in October and while I am a year or two away from retiring, I was wondering what limitations I have on income in the last year of work. Is the limitation based on the gross income or is it based on the adjusted income. I was hoping to work until July or August and in the last year and then file for Social security in October or November. My full retirement date will not be until the following June.

The earnings limit for 2023 is $21,240. This applies if you are receiving Social Security retirement benefits and the calendar year 2023 is NOT the year you’ll reach full retirement age, or FRA. If you earn more than that limit, for every $2 over the limit, Social Security will withhold $1 of benefits.

If calendar year 2023 is the year when you’ll reach FRA, then the earnings limit is $56,520. For every $3 over that limit, Social Security will withhold $1 of your benefit.

However–there is always a “however” in life, right? but this is a good “however,” just bear with me — any earnings prior to actually starting to receive Social Security benefits do not count toward the annual limit. So if you’re going to file for benefits in October or November of 2023, you can earn as much as you like in the months prior to your filing, and it will not impact your benefits. Only your earnings once you’ve begun benefits will be considered against the limit.

Additionally, in the calendar year that you reach FRA, earnings AFTER your FRA do not count toward the annual earnings limit. Once you reach full retirement age, you can earn as much as you like, with no impact on the amount of your benefits.

Of course, your earnings in any year when you’re receiving Social Security benefits does have an impact on the amount of your Social Security benefit that will be included as taxable income, but that’s a subject for another time.

Do you have questions about retirement, Social Security, where to live or how to afford it at all? Write to HelpMeRetire@marketwatch.com and we may use your question in a future story.

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