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Does Your Earnings Affect Your Social Security Benefits!

Is the money you make increasing or decreasing your Social Security benefit? Although Social Security is a vital source of retirement income, its value is more reliant on your other sources of income than many people believe.

The amount you receive from the programme is determined on how much you earn throughout your working years and in retirement. Here are three ways your earnings affect your Social Security benefits.

1. The size of your checks is determined by your earnings during your working years.

When determining your benefit, the Social Security Administration considers your average monthly income over your 35 highest-earning years. Only the first $147,000 earned in 2022 counts toward your benefit for high earners.

That’s the maximum amount of Social Security taxes you’ll have to pay this year, so the extra money won’t help you get any bigger payments.

The Social Security Administration looks at a person’s average monthly salary over all of their working years if they have worked less than 35 years. It also includes some years with no income in the computation, lowering their benefit.

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Most people make more later in their careers than they do when they first enter the profession, thus those who work for more than 35 years usually get bigger paychecks.

These latter, higher-earning years gradually begin to replace their earlier, lower-earning years in benefit calculations, resulting in permanently larger checks.

2. If you claim before you reach full retirement age, your income affects whether any money is withheld from your checks.

Your Social Security payment is subject to the earnings test if you work before reaching full retirement age (FRA), which ranges from 66 to 67 depending on your birth year. The government deducts money from your Social Security payments if your income is too high.

If you stay under your FRA for the entire year in 2022, you’ll lose $1 for every $2 you make over $19,560. If you earn more than $51,960 before your birthday this year, you’ll lose $1 for every $3 you make over that amount.

The good news is that you’ll finally get your money back. When you reach your FRA, the government recalculates your benefit amount to account for the money it withheld before. This increases the size of your future cheques.

If you don’t need your Social Security payments to pay your bills, though, deferring benefits until retirement may be a better option. This strategy will increase the size of your checks more than the previous method.

3. Whether you owe Social Security benefit taxes depends on your income in retirement.

Social Security payouts are taxed by the federal government if their income exceeds specified levels. Individuals earning more than $25,000 in preliminary income (adjusted gross income plus nontaxable interest and half of their annual Social Security benefit) and married couples earning more than $32,000 in provisional income could face taxes on up to 50% of their benefits.

Individuals with preliminary incomes of more than $34,000 and married couples with provisional incomes of more than $44,000 may be required to pay taxes on up to 85% of their benefits.Social Security Can Recipients Expect a Fourth Stimulus Payment

In addition, Social Security payouts are taxed in 12 states. Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia are the states in this category.

Each state has its own formula for determining who may be subject to taxation and how much they owe. If you live in one of these states, contact your state’s tax department for more information.

As you approach the above-mentioned thresholds, you may be able to avoid benefit taxation by lowering your yearly retirement spending or sticking to Roth funds.

However, this isn’t always possible. If you can’t avoid paying taxes on your Social Security benefits, the next best thing is to plan ahead. Build these fees into your budget so you aren’t caught off guard come tax season.


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As you move forward, keep these Social Security suggestions in mind. See whether you can use some of the suggestions above to increase your benefit or prevent having money deducted from your paychecks or being taxed.

Keep up with any changes to Social Security to ensure you don’t lose out on any further opportunities to increase your payout.

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