Ask Rusty – How do I get back benefits withheld due to the earnings limit?

Dear Rusty: If I work and take Social Security before my full retirement age, how can I find out how I will be paid back the money withheld after I pass the earnings limit?

Signed: Returning to Work

Dear Returning:

What you’re referring to is that Social Security limits how much you can earn while collecting early benefits (before your full retirement age, or “FRA”). The earnings limit for 2022 is $19,560 and if your earnings exceed that while collecting early SS benefits, you’ll be required to pay back some of your benefits.

Except during the year in which you attain your FRA, you’ll have to give SS back benefits equal to $1 for every $2 you are over the limit, which can be done either by having your benefits withheld for a time or repaying what is owed in a lump sum. In the year you reach your FRA, the limit goes up by about 2.5 times and the amount you need to pay back is less, and after you reach your full retirement age there is no longer a limit to how much you can earn. But if you have benefits withheld because you exceeded the limit while collecting early benefits, you will get some of that withheld money back after you have reached your full retirement age.

When you reach your FRA, Social Security will automatically adjust (increase) your benefit to reflect the number of months your benefits were withheld. So, for example, if you originally claimed Social Security at age 63 but were still working and, over time, you had benefits withheld for 12 months because you exceeded the earnings limit, they’ll recompute your benefit at your FRA as though you applied 12 months later than you actually did. That will happen automatically and will slightly increase your monthly benefit amount starting at your full retirement age. So, you don’t get all withheld money back in a lump sum – rather they increase your benefit a bit at your FRA so that eventually, over time, you may recover what was withheld because you exceeded the limit.