I am basically early-retired and well under 62 years old, and I do make passive income from investments (probably not relevant to this question). I am considering doing something I like to do and make a little money from it...it would probably amount to ~$15,000 - $20,000 a year. This annual income is well below my current average income, as far as what SSA uses to calculate/estimate my current retirement benefits.

I have not been able to completely understand or calculate if there would be an effect on my SSSA monthly benefit if I were to begin to work again with this level of reportable income. It seems like it would/should, and likely lower the benefit I am currently expecting, but the SSA.gov site is a bit confusing for me. Any thoughts or comments on this would be appreciated.


Two points here. First, the monthly SS payment is calculated using your highest 35 (IIRC) income years, with indexing for inflation. So if you had years of low or no income, then the extra income this & future years would replace those years in the calculation, and boost your monthly payment.

Second, if you are collecting benefits and are below the Full Retirement Age, the benefit is reduced by $1 for every $2 you earn above a minimum amount, about $17K this year. For the year in which you reach the FRA, the deduction is $1 for every $3 earned, and the limit is about $48K. (Limits are adjusted every year.) https://www.ssa.gov/planners/retire/whileworking.html

So if you earn $15K from your hobby/job, there would be no reduction in the annual benefit. If you make $20K, the benefit would be reduced by $1500. Which seems like a pretty good trade to me :-)

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  • It's first point re: 35 years I am focused on (i.e. not currently collecting benefits). My understanding is that it is the average of income for 35 years that determines amount of benefit when it is claimed. E.G. if I earn $10K a year for last 35 years of SS qualifying work, then benefit is calculated on average = $10K. But if I only worked one qualifying year in my life and made $200K? Is average $200K, or $200K / 35? If the second, it would imply that additional years at income level lower than current average would have effect of lowering average and therefore lowering benefit. – mblatz01 Sep 26 '18 at 17:57
  • Also, as you point out, correctly, a lower benefit is not necessarily the only consideration. Total money at end of the game is what counts :-) – mblatz01 Sep 26 '18 at 17:58
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    @mblatz01: No, or at least not according to my understanding. (I'm not by any means an expert, though.) As I understand it, the formula is not a simple average, so replacing a low income year with a higher income one is always to your benefit. (Also a quibble: working just 1 year doesn't get you benefits: you need IIRC 40 quarters of income to qualify.) Another point: though I can't find documentation with a quick search, I think I remember that the lowered benefits from earnings actually increase your later benefits. – jamesqf Sep 26 '18 at 18:51

I noticed a suggested link in another S-E:Money question thread provided on right: https://socialsecurity.tools/. It actually provided a way to "what-if" what I was wondering/confused about, so...yay.

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