Income earned when collecting Social Security is heavily taxed.
Think tank proposes capping Social Security benefits at $100,000
A Washington think tank has proposed capping annual Social Security benefits for married couples at $100,000 as a way to reduce a looming deficit in retirement trust funds.
Are you considering continuing to work while receiving Social Security? Working part-time to supplement your retirement savings certainly sounds like a good idea. However, be sure to realize that you will be subject to unexpected taxes on any additional income until your full retirement age (age 67 if you were born after 1960).
Depending on your date of birth, the Social Security Administration (SSA) sets annual income limits. If your income (not including Social Security benefits) exceeds that limit, the SSA will garnish a portion of your benefits each month. SSA deducts $1 from your benefit payment for every $2 of wages you earn over the annual limit.
For example, if you were born on April 2, 1964, you would be eligible for Social Security benefits because you recently turned 62 years old. This is considered an early eligibility age. But if you also work and earn more than $24,480 a year (or $2,040 a month), all income above that amount is effectively taxed at 50%, which is much higher than the top 37% of marginal income tax rates.
In addition to reducing your benefits, you may also be required to pay taxes on the income you earn in retirement (depending on your gross income, your Social Security benefits may also be taxable).
Benefit reductions occur from the calendar year in which you reach full retirement age until your birthday in that year, and the SSA deducts $1 for every $3 you earn above the annual limit, which is even higher. In 2026, that cap will be set at $65,160.
Fortunately, once you reach full retirement age, which can be calculated here, how much you work and how much you earn doesn’t affect your benefits.
Therefore, it makes sense to carefully consider annual income limits when planning for retirement.
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