Can You Clarify How The Earnings Test Works?

Nov 27 2016 - 11:15am

While almost all discussion on the earnings test refers to an annual limit, in fact it seems to be a monthly calculation. I am under FRA and was hoping to start SS in 2017. However, for 4 months in 2017 I will earn $3500, putting my annual earnings below the annual exempt amount of $16,920. HOWEVER as I look more carefully at the SS discussion on this, it seems that in fact for the 4-months in which I earn $3500, the earnings test will be applied and social security benefits withheld. Can you clarify this? Thank you, Ann

Hi Ann,

I can try. As long as your total earnings for the calendar year of 2017 are $16,920 or less, your monthly earnings are irrelevant. You could earn that much in one month, or over 12 months, and still be paid all of your benefits for the year.

There is a separate monthly earnings test that may be used as an ALTERNATIVE to the annual earnings test in the first year of benefit eligibility. The monthly test is not used unless it is more advantageous than the annual test, so it is only used in cases in which the Social Security recipient's earnings exceed the annual limit. Under the monthly test, a person can be paid for any months in which they earn 1/12th or less of the annual limit (i.e. $1410, or $16920/12, in 2017).

For example, say that you work the first 4 months of 2017 and earn $3500 per month, or $14000. As long as you don't earn more than $2,920 in the remaining months of 2017, you can be paid all of your Social Security benefits for 2017, even if you start drawing in January.

Or, say you earn $14000 in the first 4 months of 2017, and then work part-time from May through December earning $1400 per month. Even though your total earnings for the year would be $25,200, you could be paid all of your Social Security benefits for the months May through December based on the alternate monthly earnings test.

The important thing to understand is that the annual earnings test and the monthly earnings test are separate and distinct, and the monthly test can only be used in the first year of Social Security eligibility. And, the monthly test is only used in cases in which a person earns more than the annual limit, and it is more advantageous to use the monthly test. For more information on the earnings test, see the website:

Best, Jerry