Earnings Test

A person who reaches full retirement age (FRA) can earn any amount of money or work any number of hours and still receive full Social Security benefits. Prior to 2000, retirees aged 65 to 69 who were also Social Security beneficiaries would lose $1 of benefits for each $3 of earned income over a set earnings limit. The Senior Citizens' Freedom to Work Act of 2000 eliminated the retirement earnings test for beneficiaries aged 65 and over. These beneficiaries may now receive all of their Social Security benefits regardless of how much they earn, but all such earnings are still subject to FICA taxes. Social Security beneficiaries who are under FRA for at least part of the year, however, remain subject to an earnings test. The year an individual reaches FRA, a monthly earnings test is used in the first year of retirement to determine the amount of wages the beneficiary can earn in any month without loss of benefits. For amounts earned above the monthly limit, prior to the month the individual attains FRA, the beneficiary loses $1 of benefits for every $3 earned. Beginning with the month in which FRA is attained, there is no limit on the amount the beneficiary can earn.