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New Bill Loosens Social Security Earnings Restrictions

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What You Need to Know

  • Social Security recipients under full retirement age who still work get a benefit cut once they reach a certain income threshold.
  • The Senior Citizens Inflation Relief Act would raise that threshold through 2023.
  • Extra earnings could potentially also yield a slightly higher benefit in the future, said senior advocate Mary Johnson.

Rep. Bill Posey, R-Ill., introduced Tuesday the Senior Citizens Inflation Relief Act, legislation to temporarily increase the monthly wage that Social Security recipients may earn by more than $400.

The bill “has an innovative idea for helping younger working Social Security beneficiaries deal with inflation, by allowing them to earn a bit more before their benefits would be reduced by the Social Security earnings restrictions,” Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League, said Thursday in an email to ThinkAdvisor.

The Senior Citizens Inflation Relief Act would boost the monthly earnings amount in 2022 and 2023 to $2,046.67. That’s $24,560 a year.

Under current law, Johnson explained, “workers can receive Social Security benefits even while working, but they are subject to Social Security’s Earnings Restriction rules. If they are under their full retirement age they are allowed to earn $19,560 year or $1,630 per month in 2022.”

If workers “earn more than that amount their Social Security benefit can be reduced $1 for every $2 over the restricted amount,” Johnson said. “They can earn more in the year in which they attain full retirement age.”

The extra amount these workers would be allowed to earn — $416.67 — Johnson said, “could certainly make a big difference over two years. That could cover a rental increase, a car payment, several weeks’ worth of groceries, without penalizing this group of younger Social Security recipients for working and trying to make ends meet.”

The bill also holds the Trust Fund harmless “for the added benefits that these folks receive over the period,” Johnson said. These benefits, she continued, “are the same benefits those individuals have earned and paid for through payroll tax deductions. This would not be benefits that others who are not working won’t get. In other words, they are just getting more of what they are already entitled to.”

The extra earnings “could potentially also yield a slightly higher benefit in the future,” Johnson added. “Social Security recalculates the benefit annually when individuals work after starting benefits, and that could potentially modestly strengthen the benefit they receive when they stop working.”