Your Social Security Advisor

How Can We Change Social Security’s Earnings Limit? – Ask Rusty

pension family maximum social security-rusty-marry-girlfriend social security benefits benefit increase medicare benefits retiree benefit WEPDear Rusty: How do we change the Social Security earnings cap amount? Do I need to go through my Congressman? Social Security is withholding my benefit because they say I earned too much. The system is very unfair! Signed: Disgruntled Worker

Dear Disgruntled:  The Social Security earnings test has been a part of Social Security’s rules and regulations since the original Social Security Act of 1935. In fact, benefits were originally paid only if someone was not working at all, and if a beneficiary worked after they started collecting, they lost all benefits. The law has undergone changes over the years to bring it to where it is today, which is to limit the amount of earnings someone can have while collecting Social Security prior to their full retirement age before taking back some benefits.

If the earnings limit is exceeded, and you have not yet reached your full retirement age, Social Security typically withholds your benefits until they recover what you owe for exceeding the limit. The limit is adjusted annually based upon changes to the National Wage Index, and the annual limit for 2020 is $18,240, up from $17,640 last year. There is also a “first year rule” which will subject those who haven’t yet reached their full retirement age and claim benefits mid-year to a monthly limit (1/12th of the annual limit) for the remainder of that year. The earnings limit increases significantly (by about 2.6 times) during the year you reach your full retirement age (FRA), and goes away entirely once your FRA is attained.

As you are probably aware, exceeding the limit will cause Social Security to take back $1 for every $2 you are over the limit, or if you’re subject to the “first year rule” they will take back your entire benefit for any month you exceed the monthly limit. In the year you reach your FRA (but before your FRA) the “penalty” for exceeding the limit is less severe – $1 for every $3 over the limit. What you may not be aware of is that when you reach your full retirement age, Social Security will give you time credit for any months you did not receive benefits because you exceeded the earnings limit, and receiving that time credit at your FRA will result in your benefit being increased. For example, if, over the years before you reached your FRA, Social Security withheld 12 months of benefits due to you exceeding the earnings limit, when you reach your full retirement age Social Security will recalculate your benefit to account for those 12 months by changing your claim date to 12 months later than when you actually applied. That will increase your benefit somewhat and, as a result, you may be able to eventually recoup some, or all, of the benefits which were withheld (depending upon your longevity).

How can we change the earnings cap? Well, the earnings limit already increases automatically each year with changes to the National Wage Index. But if you mean how can we eliminate it, I’m not optimistic that is possible since it would require full Congressional approval as well as Executive Branch approval to do so, and since Congress is now more focused on Social Security’s broader issue of the Trust Fund being depleted in about 2035 (which will result in an across-the-board cut in benefits unless Congress acts sooner). Nevertheless, you should certainly feel free to bring your concerns about Social Security’s “earnings cap” to the attention of your Congressional Representatives. Congressional Representatives are always willing to hear and understand the concerns of their constituents, and Social Security is very much a topic of discussion in Congress today.

This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website ( or email us at [email protected].

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1 year ago

I understand, that SS can paid that new truck payment or some other thing you want but would be pushed to pay without it. So why do they say it’s available if they’re not going to give it to you? SS gives all of us x number of dollars for y numbers of years based on the average longevity age. If you take it at 62 you get less but you get it longer so it comes out about the same. You have to live beyond 89 to win. So the odds are against most of us. They need to either take away the cap or make us wait until FRA to receive benefits. And then they need to stop charging me 3 times the Medicare monthly rate at age 70 just because I’m still working full time. Which by the way comes out of my SS check along with 12% extra tax. If you’re going to tax a tax it’s not much of a benefit.

1 year ago
Reply to  LTC S

“If you’re going to tax a tax it’s not much of a benefit.” As with so many of the so called social programs designed by Progressives (American Socialists who didn’t want the American public of the time to associate them with the horrific news stories coming out of socialist Utopias like Stalin’s Russia and the rising Third Reich of Hitler’s Germany of the 1930’s) FDR’s inner circle’s primary focus was on emulating the German model from which SS was copied from. The German model’s primary focus was on tax revenue generation to the government, with a secondary objective of providing some minimal financial support to the completely destitute elderly. Thus a system where the age of retirement was set at the median lifespan of time ensuring a significant percentage of the population would never live to collect much or anything from the program. The income cap was designed to further limit or de-incentivize the value of the program to seniors living above the destitute poverty line.

Yes, I agree with you that the program is deeply flawed. Honestly, the SS program was never designed to deliver anything but a bare-bones, subsistence income to anyone but the absolute destitute elderly, who managed to live to the age to collect. That is a really small subset of the overall senior base that have made SS a central cornerstone of their retirement plans. Of course with politicians of both parties promising unrealistic benefits to the public for several decades, most of the public didn’t pay attention to the reality of what SS really was. The program, as is, has also been stretched beyond all means of being long-term solvent (due to expanding benefits to people never envisioned in the original design and diversion of funds to prop up other progressive ideals). So the real solution at this point is a total re-design of the program. Which of course almost none of the politicians in either party seem willing to acknowledge to the public at this time.

There are national and regional retirement plans that have been well designed and implements in a few other countries. However, they are based on capitalistic principles of broad market investment ( better returns ) instead of the strict progressive model we have here.

1 year ago
Reply to  LTC S

LTC S, just want to clear up a few things. First, there are many who can’t work at 62 and need the early SS money, so forcing people to wait until FRA to claim isn’t a very good approach. And to be clear, you don’t need to live until you’re 89 to break even. If you wait until your full retirement age to claim benefits, you’ll have collected the same amount of money at age 78 as you would have if you claimed at age 62. SS will say it doesn’t make any difference when you claim, but if you live a long life and you can afford to wait, you’ll collect more in total benefits by waiting. Also, Medicare premiums are on a sliding scale depending upon the amount of your “combined” taxable income. Those who have a high income may pay a higher Medicare healthcare premium than those whose income is modest. Medicare is a totally separate healthcare program and not part of Social Security; your premiums come out of your SS benefit as a convenience (you can pay separately if you choose). Everyone who works and earns must pay SS FICA tax, because – as has always been the case – those working and paying into the system provide the funding needed to pay those collecting benefits.

1 year ago
Reply to  Rusty

Many of my friends and relatives started social security at 62 just to get by. Basically, that is their only source of income. My point is some of us use Social Security as “extra” money to buy things with. So social security has implemented a few road blocks to discourage this. Is that unfair…..maybe, but that’s the way it is.
A few years back I charted what I’d net at 62 vs 70. The cumulative amount lines did not cross until age 89. You have to remember, your check is not the gross amount you’re entitle to, a number of things get taken out depending on your taxable income/age: taxes, survivor benefits, medicare part B, earning test. In my case, I would not break even until age 89 (62 vs 70). I’m still working full time so I waited till age 70. I have been paying triple Part B since 65 and will still pay triple for another 2 years after I finally retire. Is that unfair…..maybe, but that’s the way it is.

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