If you are working part time, and earning income prior to FRA, and you will be earning near or slightly more than the $19,500 limit, when are your benefits reduced? After the $19,500 has been exceeded?

How does a reduction in benefit payments affect future payments? Do you lose that amount of reduced payments forever, or can it be carried forward?

Hi. Social Security withholds the required amount of benefits as soon as they become aware that a person plans to earn more than the earnings test exempt amount. People under full retirement age (FRA) who expect to earn more than the limit are supposed to give Social Security an estimate of their expected earnings, and Social Security then suspends the person's benefits for as long as it takes to withhold the necessary amount. Then, at the end of the year, Social Security either refunds any excess amount withheld, or they recover any overpayment of benefits resulting from a person's underestimating of their earnings.

If any of a person's Social Security retirement benefits are withheld due to the earnings test, the person's monthly benefit rate is adjusted when they reach FRA. For example, let's say that Bob applies for Social Security retirement benefits when he turns age 64. Bob's primary insurance amount (PIA), which is the amount that he'd receive if he waited until his FRA of age 67 to start drawing, is $2000. But, since Bob is filing 36 months prior to FRA his benefit rate is reduced by 20% (i.e. 5/9ths of 1% x 36 months). That reduces Bob's benefit rate to $1600.

However, Bob is still working and due to his earnings his benefits are withheld for 18 of the 36 months for which he was assessed a reduction. In that event, Bob's benefit rate would then be adjusted effective with the month he reaches FRA to remove half of the reduction that was initially applied. His benefit rate would then be increased from $1600 to $1800 (i.e. 10% reduction instead of the original 20% reduction).

Best, Jerry