From 62 until the year you reach "full retirement age," there is a severe penalty for earning income while collecting Social Security retirement benefits. In 2007, $1 in benefits will be withheld for every $2 in earnings over $12,960. Therefore, people with substantial earned income probably should not take benefits before the year they reach full retirement age.
In the year you reach full retirement age, the penalty for working is less painful. In 2007, you lose $1 in benefits for every $3 in earnings over $2,870 per month, in the year you reach full retirement age.
For example, suppose Joan Miller was born in February 1942. Her full retirement age is 65 and 10 months. Therefore, Joan will reach full retirement age in December 2007.
If Joan earns $4,400 a month for the first 11 months of the year, she would be $1,530 over the limit each month. Her Social Security benefits would be reduced by $510 per month: $1,530 divided by 3. Once she reaches her full retirement age in December, Joan can earn any amount without losing any benefits.
