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I filed early for retirement benefits but am still working. How do I pay the $1 for $2 if I make more than the earnings limit?

You don’t pay Social Security. It’s a question of what they don’t pay you — or rather, how long they don’t pay you. If you exceed the earnings limit, Social Security will hold off on sending your payment for as many months as it takes to “repay” the $1-for-$2 benefit withholding.

Say you’re 64, collecting a monthly retirement benefit of $1,200 and working a part-time job that pays $26,000 a year. Because you claimed benefits before your full retirement age (66 years and 4 months or 66 and 6 months, depending on whether you were born in 1956 or 1957), you are subject to the earnings limit, which in 2023 is $21,240. (Social Security adjusts the cap annually, based on national wage trends.) You lose $1 in benefits for every $2 of work income above that amount. 

In this case, that’s $2,980 (half of the $5,960 you earned that exceeds the limit). Based on your $1,200 benefit, that works out to about 2.5 months of withholding — but Social Security doesn’t do fractional payments, so they round up and stop sending your benefits for three months. (The difference from that third month will be refunded later.) They’ll resume paying your full monthly amount after they have recouped the $2,980.

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Social Security will automatically make these adjustments based on the earnings data it gets from your W-2s and tax returns. Alternatively, you can report estimated income to Social Security. Here's how that works.

At the beginning of the year, you tell Social Security what you expect to earn that year, by phone at 800-772-1213 or in person at your local Social Security office. (Local offices fully reopened in 2022 after being closed to walk-in traffic for more than two years due to the COVID-19 pandemic, but Social Security recommends calling in advance and scheduling an appointment to avoid long waits.) You can update the estimate at any time if your work situation changes. 

Based on this information, Social Security stops your monthly benefit until they recover $1 for every $2 that your anticipated earnings exceed the limit. At the end of the year, you notify Social Security what you actually earned and they revise the calculation. If it turns out they withheld too much, you’ll get a refund. If they didn’t withhold enough, you pay the difference.

Self-reporting has the advantage of timeliness and relative certainty. If you let tax filings do the reporting for you, Social Security receives data on your income many months after you earned it and may not implement the benefit withholding until many months later. 

Keep in mind

  • The earnings limit is less stringent in the calendar year in which you reach full retirement age. In 2023, the cap for people in this cohort is $56,520, and the benefit reduction is $1 for every $3 over the limit. Once you reach full retirement age, there is no limit on how much you can earn from work.
  • When you reach full retirement age, Social Security will recalculate your benefit so that, over time, you can recoup what you lost from earnings-test withholding.

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