How Does the Social Security Earnings Limit Work?

An individual can work and earn Social Security benefits, but if he has not yet reached the full age of retirement and makes over the yearly limit, his benefits are reduced, according to the Social Security Administration. Once he reaches the full age of retirement, he can receive full benefits.

When the Social Security Administration determines how much to deduct from benefits, they count the wages the individual makes from his job or net earnings if he's self employed, says the Social Security Administration. This includes commissions, bonuses and vacation pay. They do not include annuities, investment income, veterans or other military benefits, pensions and interest. Starting the month he reaches full retirement age, his benefits are increased.

As long as an individual continues to work, even if he is receiving benefits, he still pays Social Security taxes on those earnings. The Social Security Administration checks his record every year to determine whether the earnings have increased his monthly benefit. If there is an increase, he is sent a letter advising of the new benefit amount. If he needs to report a change in his earnings after receiving benefits, he should contact the Social Security administration right way, states the Social Security Administration.