How Much Can I Earn While on Social Security Benefits in 2020

There are many factors in determining what you can or cannot earn when on Social Security disability. Let’s discuss a few of the issues. First, you need to estimate how much your Social Security payments will be when you retire.

Here are some key points for creating an estimate of your Social Security retirement:

1. Create a My Social Security account on the SSI website
2. Determine your Social Security payment (you can skip this step if you do #1, the site will do it for you)
3. Adjust for your retirement age
4. Subtract your Medicare premiums
5. Remember your income tax withholding

What is an Average Social Security Payment?

The average Social Security paid benefit was $1,503 per month in January 2020. The maximum Social Security benefit for someone who retires at full retirement (age 67) is $3,011 in 2020. You can receive more if you defer your retirement to the age of 70½. However, to earn the maximum Social Security payment of $3,011, you would need to have made the maximum taxable amount of $137,700 for 2020, over a 35-year period.

How do I Calculate My Social Security Payment?

The Social Security Administration will do this for you if you create a My Social Security account. It is easy to do, and you can log in to see your projected benefit at various ages. The SSA uses your highest 35 years of earnings (or your current and projected earnings) to calculate this. Any earnings before your 60th birthday are adjusted for inflation – meaning that while your earnings may have crept up over your career, the money you earn this year may not be one of your highest earnings years.

If you become eligible for Social Security payments in 2020, the benefit amount is calculated by multiplying the first $960 of your average indexed monthly earnings by 90%, the remaining earnings from $960 to $5,785 by 32%, and average earnings over $5,785 by 15%. The sum of these three amounts, rounded down to the nearest 10 cents, is your calculated payment amount. Cost-of-living adjustments may boost your payments above your calculated amount.

Factor in Your Retirement Age

Your age when you begin accepting Social Security payments plays a significant role in the amount you receive upon retirement. Your monthly Social Security benefit is reduced if you claim your benefit before your full retirement age. You can claim your Social Security benefit as early as the age of 62. Check with your local SSA office to confirm your benefit amount. You can boost your monthly payments for each month if you delay claiming between your full retirement age, normally 67, and age 70½.

Married couples have more claiming options. Married individuals are eligible for Social Security payments equal to 50% of the higher-earning spouse's payment if that's more than payments based on their own work record. As with other Social Security payments, a spouses’ payments are reduced if claimed before full retirement age. You can also request payments based on an ex-spouse's work record if the marriage lasted for at least 10 years. A spouse may also claim survivor's payments if their higher-earning spouse passes away first.

Subtract Medicare Premiums

Many retirees have their Medicare Part B premiums deducted from their Social Security checks. The standard Medicare Part B premium is $144.60 per month in 2020. Medicare Part B payments are prohibited by law from decreasing Social Security payments for existing beneficiaries, so a Medicare Part B premium hike can't be more than your annual Social Security cost-of-living adjustment.

Some might see their Social Security check go down due to their Part D drug premium. Medicare Part D premiums vary based on the plan you select; you are eligible to change plans each year during the open enrollment period.

Income Tax Withholding

Many retirees have to pay income tax on their Social Security payments, especially if they have additional sources of income after retiring. If Social Security is your only source of income, you pay no taxes on it. If you have other sources of income, such as a pension, IRA withdrawals, part-time work, interest, and dividends, then these other incomes go into the IRS formula.

The result is that somewhere between zero and 85% of your Social Security benefits are subject to taxation. You can elect to have 7%, 10%, 12%, or 22% of your Social Security payments withheld for income taxes. It is always good to check with a CPA or accountant, if you have one, to see what is best for your situation.

Create a My Social Security Account

You can get a personalized estimate of your future Social Security benefits at any claiming age by creating a My Social Security account. These estimates are based on your actual earning history and tend to be the most accurate if you are approaching your retirement age. This will save you time trying to calculate your estimated benefit. Your estimates will probably change each year. This is especially true if you have a significant salary change or a sudden gap in your earnings history.

You can also use the Social Security calculator on the SSA site to help you determine the best age to sign up for retirement payments based on your individual situation.

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