From The Motley Fool — By Kailey Hagen —  

Many seniors don’t realize it, but the Social Security Administration can withhold money from your checks if you’re still working while you claim benefits. Not all seniors run into this issue as there are rules that determine which seniors could face this benefit withholding, and they just got a little more flexible as of January 1st.

Below we’ll look at what you need to know so you’re not caught off guard if you encounter benefit withholding this year.

What is the Social Security earnings test?

The Social Security earnings test is what the government uses to determine whether to withhold money from a senior’s benefit checks. It only applies to those working and claiming while still under their full retirement age (FRA). This is somewhere between 66 and 67 for today’s workers. Those who have already attained their FRA may earn as much as they’d like without fear of benefit withholding.

Early claimers — those who sign up for Social Security before their FRA — could lose money from their Social Security checks if their annual income exceeds a certain amount. In 2023 those who were under their FRAs the entire year lost $1 for every $2 they earned over $21,240. Those who reached their FRA during 2023 only lost $1 for every $3 they earned over $56,520 (if they earned this much before their birthday).

Fortunately, the Social Security Administration increased the above limits for 2024. Those under their FRA all year can now earn up to $22,320 before losing any money from their checks, and those who will reach their FRA this year only have to worry about benefit withholding if they earn more than $59,520 before their birthday. For some, this could be the bit of wiggle room they need to avoid losing any of their Social Security checks this year.

Can you avoid the Social Security earnings test?

It might be possible for some workers to reduce their income enough to avoid the earnings test, especially if they’re only working part time. However, for others this might not be feasible. There are two ways you could handle this.

If you haven’t begun claiming yet and are worried about losing money to the earnings test, you may want to hold off on applying for Social Security until you’re ready to retire. But this might not be an option if you need your checks now to help cover your bills.

Your other option is to just plan for smaller benefit checks in the near term. When you reach your FRA, the government will recalculate your benefit to include the money it previously withheld, and your checks from that point on will be slightly larger. If you don’t need all of your benefits today, this could work to your advantage in the long run.

Keep in mind that earnings test limits typically rise every year, so even if you encounter this benefit withholding in 2024, that’s not a guarantee it’ll be an issue in subsequent years. And if you have any questions about how the earnings test could affect your specific benefit, reach out to the Social Security Administration for clarification.

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