For retirees in Florida, understanding how your income after retirement impacts your Social Security benefits is essential to protecting your financial stability. Whether you’re transitioning from a federal career or exploring part-time work opportunities, the Social Security earnings test determines if your benefits will be temporarily reduced based on how much you earn. At United Benefits, we specialize in helping retirees maximize their federal annuity and Social Security income. Let’s explore how the Social Security earnings test affects Floridians and what you can do to keep more of your hard-earned money.
What Is the Social Security Earnings Test?
The Social Security earnings test is a formula used by the Social Security Administration (SSA) to determine if your retirement benefits should be reduced based on your work income before reaching full retirement age (FRA). It only applies if you’re receiving early Social Security benefits and continuing to work. Once you reach FRA—between 66 and 67 depending on your birth year—the earnings test no longer applies, and your benefits are recalculated to account for any months in which benefits were withheld.
Earnings Limits for 2024
Each year, the SSA adjusts the earnings limit based on national wage trends. According to the Social Security Administration’s 2024 fact sheet, if you are under full retirement age for the entire year, you can earn up to $22,320 annually without affecting your benefits. For every $2 you earn above that limit, $1 in benefits will be withheld. In the year you reach full retirement age, the earnings limit increases to $59,520, and only $1 is withheld for every $3 you earn over that amount. After you reach your FRA, there is no limit on your earnings at all.
How the Earnings Test Applies to Federal Retirees
Many federal employees retire before reaching full retirement age, especially those under the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS). If you decide to supplement your income with part-time work after retiring, your Social Security benefits may be temporarily reduced if you are receiving them before FRA.
This earnings test can be confusing because it only considers earned income—wages or self-employment. It does not include income from your federal pension, Thrift Savings Plan (TSP), or other investments. That means your FERS or CSRS annuity won’t count toward the Social Security earnings limit.
Florida’s Role in Your Retirement Income
Living and working in Florida can offer several financial advantages for retirees. Florida does not have a state income tax, which means your Social Security benefits, federal annuity, and wages are all free from state income taxation. However, the federal earnings test still applies nationwide—so even though Florida won’t tax your benefits, the federal government can still temporarily withhold them if you exceed the annual earnings limit before reaching FRA.
For Florida residents continuing to work after retiring from federal service, this means you can enjoy a tax-friendly environment while strategically monitoring your earnings to maximize your Social Security benefits.
Understanding “Withheld” vs. “Lost” Benefits
One common misconception about the Social Security earnings test is that withheld benefits are lost forever. That’s not the case. If your Social Security checks are reduced due to earning above the limit, the SSA recalculates your benefit at full retirement age to credit you for months in which benefits were withheld. This recalculation typically results in a slightly higher monthly payment going forward. So, while the earnings test can temporarily reduce your payments, it won’t permanently reduce your overall lifetime benefits.
Strategies to Reduce the Impact of the Earnings Test
- Time your Social Security benefits wisely: Consider delaying benefits until your income drops or you reach FRA to avoid temporary reductions.
- Track your earnings carefully: Plan your work schedule so that your total earnings stay below the SSA’s annual limits, minimizing withheld benefits.
- Coordinate annuities and TSP withdrawals: Withdrawals from retirement accounts don’t count toward the earnings test, so consider using these funds for income while continuing to work.
- Consult an expert: United Benefits offers comprehensive retirement solutions specifically designed for federal employees navigating complex benefit interactions.
Social Security and Federal Benefits Integration
Your federal retirement benefits interact closely with Social Security, especially for FERS employees who are fully covered under Social Security. CSRS retirees generally do not pay into Social Security, though some may qualify for benefits through other employment. If you’re a CSRS retiree receiving a Social Security benefit based on another career or a spouse’s record, the Windfall Elimination Provision (WEP) or Government Pension Offset (GPO) may reduce your benefits. These provisions are separate from the earnings test but can significantly affect your retirement income projections.
Examples of How the Earnings Test Works
Let’s look at an example: Mary, a 63-year-old retired federal employee in Orlando, chooses to collect early Social Security benefits of $1,800 per month. She earns $25,000 in part-time consulting income for the year. Because the earnings limit is $22,320, she earns $2,680 above the threshold. The SSA will withhold $1 for every $2 she exceeds the limit, or $1,340 for the year. Instead of receiving all twelve Social Security payments, she might have one check withheld entirely, with the balance coming throughout the year. When she reaches her full retirement age of 67, her benefit will be recalculated to account for the withheld months.
Now consider Tom, age 65, who will reach his FRA in December 2024. If Tom earns $62,000 from part-time work during the year, he will exceed the $59,520 limit by $2,480. The SSA will withhold $1 for every $3 above the limit, or around $826. Once Tom turns FRA, he can earn any amount without affecting his benefits.
Planning Ahead With Expert Support
Because the Social Security earnings test can dramatically affect your monthly income, effective planning is essential—especially for retired federal employees balancing multiple income streams. At United Benefits, we help you understand how earnings, annuities, and Social Security interact, ensuring you can make confident decisions about when to claim benefits, whether to work, and how to optimize your post-retirement income.
Our retirement specialists can help you:
- Estimate how continued employment will affect your Social Security benefits.
- Project your total income when combining federal pensions and Social Security.
- Develop a personalized strategy to minimize benefit reductions.
- Prepare for changes in the earnings test as you near full retirement age.
Contact United Benefits
If you’re a Florida retiree looking to supplement your federal annuity with part-time work, understanding the Social Security earnings test is critical to maintaining financial health. The professionals at United Benefits are here to guide you every step of the way—from interpreting SSA rules to optimizing your benefit strategies.
Call us today at 866-558-2121 or visit our office at 3295 County Road 47, Florence, AL 35630. You can also explore more helpful resources or contact us through our website at https://unitedbenefits.com/.
Retirement should bring peace of mind, not confusion over income rules. With the right strategy and expert support from United Benefits, you can enjoy working during retirement without worrying about losing your Social Security benefits.