This Proposal Could Help Social Security Recipients Avoid Losing Benefits

One of the best things about Social Security is that you get a choice as to when you claim benefits. You’re entitled to your complete monthly benefit at full retirement age, or FRA. That age kicks in at 66, 67, or somewhere in between, depending on your year of birth.

However, you’re allowed to file for Social Security outside of FRA. The earliest age you can sign up is age 62, but filing before FRA will result in a reduced benefit.

On the flipside, if you delay your filing beyond FRA, you’ll grow your monthly benefit by 8% for each 12-month period you wait to sign up. And that incentive lasts until age 70 (meaning, you can no longer grow your benefits past age 70, but any boost you lock in will be yours to enjoy on a permanent basis).

Meanwhile, it’s possible to work and collect Social Security benefits at the same time. Once you reach FRA, your earnings won’t impact your benefits at all. But if you’re working and receiving benefits before reaching FRA, you’ll be subject to an annual earnings-test limit.

There’s a new proposal on the table, however, that seeks to raise the earnings-test limit. And if it passes, seniors on Social Security could get a lot more leeway — and potentially avoid losing out on benefits they’d rather collect.

Could the earnings-test limit increase?

This year, seniors on Social Security can earn up to $1,630 a month, or $19,560 a year, before having their benefits impacted. If your earnings exceed this year’s limit, you’ll have $1 in Social Security withheld per $2 of earnings.

Recently, however, Rep. Bill Posey introduced the Senior Citizens Inflation Relief Act, and it calls for an immediate increase on the earnings-test limit for 2022 and 2023. If passed, the current earnings-test limit would increase from $1,630 a month to $2,046.67 a month, or $24,560 a year. (For the purpose of clarification, it’s worth noting that the earnings-test limit is higher for seniors reaching FRA this year.)

The logic behind this change would be to give seniors more options for generating income at a time when inflation is soaring. As it is, seniors routinely struggle to keep up with living costs even during more moderate periods of inflation. But right now, expenses are through the roof for workers and seniors alike. And the thought behind Rep. Posey’s proposal is to provide temporary relief so that seniors don’t have to resort to costly debt just to make ends meet.

A true lifeline

Some seniors are surprised to learn that their Social Security benefits are impacted by their earnings if they’ve filed before reaching FRA. Now the good news is that withheld benefits under the earnings-test aren’t forfeited — they’re simply repaid later on, once FRA kicks in. But for seniors who need that money immediately, that’s not all that helpful.

Increasing the earnings-test limit could give many seniors today some much-needed relief. And so seniors should hope that Posey’s proposal gains enough traction to become reality.

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