The maximum income you can earn when you are 65 and on Social Security depends on when you were born. In general, if you continue to work after retirement, your earnings will not affect your Social Security retirement benefits if you have reached your full retirement age. However, your full retirement age is 65 only if you were born in 1937 or earlier.
Your full retirement age
If you were born between 1938 and 1942, add 2 months to your full retirement age for every year you were born after 1937. For example, if you were born in 1939, your full retirement age is 65 years and 4 months.
If you were born between 1943 and 1954, your full retirement age is 66. If you were born between 1955 and 1959, add 2 months to your full retirement age for every year you were born after 1954. For example, if you were born in 1956, your full retirement age is 66 years and 4 months. If you were born in 1960 or later, your full retirement age is 67.
These dates apply for those born between January 2 and December 31, inclusive. If you were born on January 1, use the full retirement age which corresponds to the previous year.
How working when you are below your full retirement age affects your benefits
If you are below your full retirement age, your benefits will be reduced if your income exceeds the annual limit. In 2011, this limit is $14,160.
The amount by which your benefits will be reduced depends on the amount you have earned above the annual limit. For every $2 you earn which is above the annual limit, your benefits will be reduced by $1.
In the year in which you reach your full retirement age, the annual limit increases dramatically. In 2011, this limit is $37,680. As well, your benefits will be reduced by $1 for every $3 you earn which is above the annual limit, instead of every $2. In the final month when you reach full retirement age, you will receive your full Social Security benefits, regardless of how much you earn.
Your wages after signing up for Social Security may increase your overall average earnings. Because your Social Security benefits are calculated based on those earnings, your benefits may be higher than they would otherwise be. As well, when you reach your full retirement age, your Social Security benefits will be recalculated to take into account any month in which your benefits were reduced. As a result, your benefits after you reach full retirement age will probably increase.