Supplemental Income When Taking Retirement

Social Security and Supplemental Security are two government programs designed to provide a source of income to people in the U.S. who are either retired or unable to work due to a disability. The monthly payments from both of these programs offer significant financial security to people who can’t work or have already retired from their job.

But what happens if a person qualifies for Social or Supplemental Security, but still wishes to take on some employment? Read on for a quick guide to earning additional income while also receiving a retirement or disability income benefit from the federal government.

What Is Social Security?

Social Security is a program administered by the federal government to provide retirees with a monthly income. The purpose behind Social Security is to ensure that senior citizens can still pay rent and cover expenses, even if they are no longer able to work.

Most jobs in the U.S. automatically take Social Security taxes from employees’ salary; and anyone who is 62 years or older and has paid Social Security taxes for at least 10 years is eligible to receive Social Security benefits. The monthly benefit amount varies depending on what you earned during your career and cost-of-living adjustments from the government. In 2023, the average monthly benefit is $1,827.

While 62 is the earliest a person can take Social Security, they won’t receive full benefits until they reach their full retirement age—between 66 and 67, depending on year of birth. (For more on retirement ages and deciding when to start Social Security, check out this blog).

Earning Additional Income

Social Security provides a monthly income, but it’s still possible that a person receiving Social Security benefits may wish to earn additional money. Some older employees choose to go part-time at the office rather than fully retiring. Others may want to take on freelance jobs, or earn funds as a gig worker, as a way to stay busy and increase their savings after leaving a full-time job.

If you have already reached full retirement age, there are no rules regarding supplemental income. You can earn as much as you like every month, with no impact on your Social Security benefits. However, if you start taking Social Security before reaching your full retirement age, your monthly benefits may be reduced depending on how much supplemental income you’re earning.

What Counts as Income?

When determining your earnings, the Social Security Administration only looks at employment-based income, which could mean working for a business or being self-employed. Earnings that you make from pensions, investment accounts or other public benefits don’t count as supplemental income and won’t affect your Social Security benefits.

Annual Earning Limits

To understand how supplemental earnings will affect your Social Security benefits, check out the annual limit which is published yearly by the Social Security Administration. For 2023, the annual limit is $21,240; and for every $2 that you earn above that annual limit, $1 will be deducted from your Social Security benefit payments.

However, once again, keep in mind that this rule only applies if you are taking your Social Security benefits early. Once you reach the full retirement age, supplemental income has no effect on your monthly Social Security benefits.

Of course, most people don’t reach their full retirement age at midnight on January 1^st, on the dot. If your birthday comes halfway through the year, there are other considerations. In the year in which you will reach full retirement age, your annual limit changes to a different figure ($56,520 in 2023) and you will have $1 deducted for every $3 earned above this figure. And, once the calendar rolls over to the month just before your full retirement birthday, earnings are no longer counted against your Social Security benefits.

With so many facts and figures flying around, it can be tricky to understand exactly how supplemental income might impact your benefits—but luckily, the Social Security Administration has a useful calculator online to help you understand the precise impact of additional earnings on your Social Security income.

What About Supplemental Security Benefits?

The Supplemental Security Income (SSI) program is administered by the Social Security Administration, but offers benefits for reasons other than retirement. People can receive Supplemental Security benefits if they are disabled and have limited income and resources.

Because Supplemental Security is specifically designed for low-income beneficiaries, there are strict rules around how much money you can earn while still receiving benefits. Eligibility tables are published online. In 2023 the limit is $1,913 in pre-tax wages for individuals and $2,827 for couples. Income derived from pensions, gifts and other resources is also limited, so be sure to check Social Security Administration resources online if you have concerns around income limits.