Editor’s Note: After a long career in the data processing industry, Russell Gloor joined the Association of Mature American Citizens in 2013. Gloor received training from the National Social Security Association and was accredited by the NSSA® as a Social Security adviser in 2016. Currently part of the AMAC Foundation’s Social Security Advisory team, he annually counsels thousands of American seniors about their Social Security options. In addition to answering Social Security questions daily, he also authors the AMAC Foundation’s nationally syndicated weekly “Ask Rusty” advice column and has written three instructional books about Social Security.

Dear Rusty: How much would be withheld from my social security benefits? I am 62 and can claim about $1,900 a month now. I’m still working, making about $75,000 per year. How much of my benefits would I get? What would be withheld from me and when would I get it back? And would there be any penalty? Signed: Eligible but Working

Dear Eligible: In the scenario you describe, you will not be eligible to collect Social Security retirement benefits at this time because your earnings are too high. Here’s how that is determined:

• At age 62, you are subject to Social Security’s “earnings test” which limits how much you can earn while collecting early benefits. The earnings limit applies until you reach your full retirement age, which for you is 67.

• Your penalty for exceeding the earnings limit now would be $1 for every $2 you are over the limit. At your current salary of $75,000 per year, you will be over the 2022 annual earnings limit of $19,560 by $55,440, which means you would owe Social Security $27,720. Since your age 62 benefit amount is about $1,900 per month ($22,800/year), your annual Social Security benefit would be insufficient to offset the penalty for exceeding the earnings limit, thus you would not be entitled to a Social Security benefit because of your current earnings. You will again be eligible to collect Social Security when your earnings are substantially less, or when you reach your full retirement age, whichever occurs first.

Social Security’s earnings test affects everyone who works and earns when collecting benefits before reaching full retirement age. Each year, Social Security sets a limit for how much can be earned before benefits are affected (the 2022 limit is $19,560; it increases slightly each year). Those who exceed the limit pay a “penalty” of $1 for every $2 they are over the limit, which must be paid to Social Security either in a lump sum, or by having benefits withheld for enough months for Social Security to recover what is owed. If your Social Security benefit isn’t enough to offset the penalty for exceeding the earnings limit, no benefits will be paid.

Those collecting early benefits who earn only slightly more than the annual earnings limit can collect some benefits each year because their penalty is small enough. For example, someone earning $25,000 per year would exceed the 2022 earnings limit by $5,440 and, thus, incur a penalty of $2,720. That would probably mean about two months of withheld benefits, enabling them to get benefits for the remaining 10 months of the year. Social Security will withhold benefits for enough months to recover whatever the beneficiary owes for exceeding the limit.

The rules surrounding Social Security’s earning test are somewhat complex. For example, there is a “first year rule” which exempts salary earned prior to claiming Social Security from counting toward the earnings limit. When someone first claims Social Security midyear they are, instead, subject to a monthly limit ($1,630 for 2022) for the remaining months of the calendar year. If the monthly limit is exceeded, no benefits are payable for that month. The earnings limit no longer applies when full retirement age is reached but is still in effect in the months of that year prior to attaining full retirement age. The earnings limit during those months is much higher and the “penalty” for exceeding it is less.

Social Security prefers that those working and collecting early benefits contact them in advance to withhold benefits for as long as needed to offset the expected penalty. Doing so will avoid an overpayment notice being issued in the following year when your earnings amount is received from the IRS.

After full retirement age, Social Security will adjust the beneficiary’s payment to account for months benefits were withheld and increase the monthly amount accordingly. That will result in some, or perhaps all, of the withheld benefits being recovered over time (depending on longevity).

This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association. NSSA® and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit the website (amacfoundation.org/programs/social-security-advisory) or email ssadvisor@amacfoundation.org.