What will happen to your Social Security benefits if you earn above the earnings limit while under FRA?

When you are under your Full Retirement Age (FRA) and earn above the specified annual earnings limit, the Social Security Administration has a temporary reduction in your benefit payments. Specifically, 50% of the earnings above the earnings limit are withheld from your Social Security benefits. This means that if your income exceeds the threshold, the amount exceeding the limit is factored in, and half of that excess amount will be deducted from your benefits for the year.

It's important to note that this withholding operates on a temporary basis; once you reach your FRA, any benefits withheld due to excess earnings will not be permanently lost. Instead, they are recalculated, and your benefit amount may be adjusted upwards to reflect those withheld amounts, effectively restoring them over time in the future.

Understanding this key detail is crucial for individuals considering working while receiving Social Security benefits before reaching their FRA as it allows them to plan their finances better without the fear of losing those benefits entirely.