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Working After Retirement? Earnings Restrictions Lifted For Some But Pitfalls Remain The retirement“ earnings test” for retirees 65 and up has ended. Until very recently, Social Security recipients age 65 to 70 lost$1 in benefits for every $3 they earned over a maximum. In 2000 that amount was originally $17,000, but the law change is retroactive to January 1, 2000. Now retirees over 65 can earn as much as they want to, right? Earnings may still subject your Social Security benefits to tax. Those rules remain unchanged. (Also unchanged are the rules for retirees younger than 65. Benefits of Social Security recipients age 62 to 65 are still reduced by $1 for every $2 earned beyond the limit, which is still $10,080 this year.) Taxation of benefits has nothing to do with reduction of benefits. Reductions in benefits only occur if you work during retirement and only if your income from that work exceeds certain levels. In addition unearned income, such as interest and dividends from savings and investments, does not reduce benefits, but it may subject your Social Security benefits to taxation. Taxation of Social Security benefits occurs when your income exceeds certain levels. To determine whether your benefits would be subject to tax compute your Adjusted Gross Income (AGI). Add all UNEARNED income and one-half of all Social Security benefits you received during the year to your AGI. If your total is greater than $32,00 (joint) or $25,000 (single), then up to 85% of your benefit must be added as income to your original AGI.
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