Social Security Income Benefits: Receiving Social Security benefits doesn’t stop you from earning additional income from other sources, which can be helpful for unexpected expenses or financial needs. It’s important to be cautious if you claim benefits before reaching your full retirement age of 67.
Before this age, there’s a limit to how much you can earn annually without facing reductions in your benefits. For instance, if you’re under 67, receive $1,000 a month in benefits, and earn $22,000 a year from a job, you would exceed the $19,560 earnings limit. For every $2 earned over the limit, $1 is deducted from your benefits, resulting in a $1,220 reduction. This means your total benefits would decrease significantly, leaving you with $10,780 instead of $12,000 for the year.
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Once you reach full retirement age, the earning limit no longer applies, and you can earn freely without affecting your Social Security benefits.Here’s a detailed explanation of the exceptions:
What Income Won’t Affect Your Social Security Benefits?
Dividends
Money earned from investments, savings, or bonuses does not count toward the earnings limit before your full retirement age (67). Only income from wages or self-employment affects the $23,400 annual limit.
IRA Distributions
If you withdraw funds from an Individual Retirement Account (IRA) to cover expenses, this money is not considered earned income. Therefore, it won’t impact your Social Security benefits.
Pension Payments
Income from a pension or retirement plan is excluded from the earnings limit calculation before age 67. This means your benefits remain unaffected by pension payouts.
Rental Income
If you rent out property, this income won’t reduce your Social Security benefits unless managing real estate is your primary job. Passive rental income is excluded.
Inheritances
Money or property received as an inheritance is not considered income for Social Security purposes. Inheritances are generally not taxed, though state-specific rules may vary.
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VA Benefits
Veteran’s benefits, whether related to disability or other services, do not count against Social Security benefits. These payments are treated separately and won’t reduce your monthly checks.
Royalties
Earnings from royalties, such as those from books, music, or patents, don’t affect your Social Security benefits until the year you reach full retirement age.
Unemployment Benefits
Unemployment compensation does not impact your Social Security payments before you turn 67. However, be aware that state-specific rules could create exceptions in rare cases.
Self-Employment Earnings
Income earned individually, rather than as part of a business, typically won’t interfere with your Social Security benefits.
Pension Plans
Funds from pension plans are exempt from federal income tax and don’t count as earned income. This ensures your Social Security benefits remain intact.