A Real-Life Example of How the Withholding Works

Say you’re 63, collecting $1,500 a month in Social Security, and you pick up a part-time job earning $32,320 for the year. That’s $7,840 over the $24,480 limit. Social Security would withhold half of that overage, $3,920, from your benefits over the course of the year.

Here’s the part most people don’t expect: Social Security doesn’t shave a little off every monthly check. Instead, it withholds entire monthly payments until the required amount is covered. So instead of a slightly smaller check every month, you might simply not receive a payment at all for two or three months while the withholding catches up.

Why This Catches So Many Retirees Off Guard

With full retirement age now permanently set at 67 for anyone born in 1960 or later, there’s a longer window than ever where someone can be collecting Social Security, still healthy enough to work, and still young enough for the earnings test to apply. Many retirees claim benefits at 62 thinking a part-time job is just a bonus on top of their check, only to find out later that Social Security expected a portion of it back.

Timing also plays a bigger role than most people realize. If you turn full retirement age in, say, September 2026, only your earnings from January through August count toward the $65,160 limit. Starting in September, you could earn any amount and Social Security wouldn’t touch your benefit.