Senior Living



Social Security and You: Early Retirement Reduction Can Be Adjusted Later

Tom Margenau on

There is a little-known Social Security rule that may help some people who started their Social Security checks before full retirement age and therefore took a reduction in their monthly benefits, but then decided to return to work. Now they wonder if their early retirement reduction is permanent. The answer is it might not be. And that's because a software program built into the Social Security Administration's computers kicks in after you reach full retirement age that is designed to remove the reduction factor for any months you didn't get a Social Security check because of the SSA's earnings penalty rules. The program is called the Adjustment to the Reduction Factor, or ARF.

Before I explain how the ARF works, I've got to give a little background. I will start out with a quick overview of the earnings penalty. The law says that one dollar must be withheld from your Social Security checks for each two dollars you earn over a certain threshold that changes every year. The 2022 threshold is $19,560. So, to give a really simple example, if Hank is working and plans to make $29,560 in 2022, then $5,000 must be withheld from his Social Security checks in 2022. ($29,560 minus $19,560 equals $10,000 divided by two equals $5,000.)

Now, some more background. I must explain the reduction factors for early retirement. The law says if you start your Social Security checks before full retirement age, your benefit will be reduced five-ninths of 1% for each of the first 36 months of reduction and five-twelfths of 1% for any additional months. That's a bit too convoluted for the examples I'm going to use in this column. So, I am going to keep things simple by saying that your benefit is reduced about one-half of 1% for each month you receive benefits before full retirement age.

For example, let's say that Hank's full retirement age is 67, but he started his benefits when he was 65. That's 24 months early, so his Social Security benefit was reduced by about 12%. In other words, at age 65, Hank started getting about 88% of his full retirement age benefit.

And with that bit of background, I can close the circle on my ARF explanation. In my above example, I said that Hank started getting an 88% benefit rate when he took his Social Security at age 65. And because his earnings exceeded the penalty threshold, I pointed out that $5,000 had to be withheld from his 2022 benefits. Let's assume his monthly check is $2,500. In other words, the SSA held back two of Hank's Social Security checks in 2022 because of his excess earnings. And let's further say that Hank's earnings in the following year caused two more of his Social Security checks to be withheld.

Once Hank turns 67, the ARF program kicks in. That program says Hank's ongoing permanent benefit can only be reduced for those months he actually received a Social Security check before he turned his full retirement age. In our example, Hank only received 10 Social Security checks in 2022 and will get another 10 checks in 2023. In other words, he got 20 of his 24 Social Security checks before reaching full retirement age.

So, instead of the initial 24 month, or 12%, reduction, Hank's ongoing benefit is adjusted to give him only a 20 month, or 10%, reduction. In other words, starting at age 67, Hank will get a 2% boost in his Social Security check. Actually, the ARF program usually isn't finished running until several months after full retirement age, but it will be retroactive to the month of FRA.

That was a very simple explanation of how ARF works. Now here are a couple recent questions I got dealing with that procedure.

Q: I recently started my Social Security at age 62. I get $1,650 per month. Now, out of the blue, I've been offered a job that will pay me $35,000 annually. I think I'm going to take the job. But I'm in a quandary about how to handle my Social Security. Can you advise?


A: Well, you've essentially got two options. You could simply withdraw your Social Security claim. (Anyone has up to 12 months after filing for benefits to change their mind.) If you do that, you'd have to repay any Social Security benefits you've received so far. Then when you reach your full retirement age of 67 (when the earnings penalty rules go away), you would re-file for your Social Security. It would be like you are just starting all over again and you will get your full retirement benefit rate.

Your other option would be to continue receiving Social Security benefits and let the earnings penalty and ARF provisions take their course. I will let you do the math. But with those earnings penalty provisions, you would be due some benefits between now and full retirement age, but other benefits would have to be withheld. And when you reach 67, the ARF procedure would kick in and your benefit would be adjusted so your ongoing rate is only reduced for the months you actually got a Social Security benefit between 62 and 67.

If I were you, I'd be inclined to go with the first option. And that's primarily because option number two is going to complicate your Social Security life for the next several years.

Q: I've heard that if you take early retirement benefits and then take a job and have those benefits withheld, once you reach full retirement age, all those withheld benefits are repaid to you. Sounds like a great deal!

A: It would be a great deal if it were true -- but it's not. Your monthly benefits are NOT repaid to you. As explained in this column, what does come back to you is the reduction factor for those months you didn't get a Social Security check between your benefit start date and FRA.

Let's go back to Hank's example earlier in this column. He had four Social Security checks, totaling $10,000, withheld from his benefits because of the earnings penalty rules. When he reaches his full retirement age, he does not get that $10,000 reimbursed to him. What he gets because of the ARF procedure is a 2% boost in his monthly benefits.


If you have a Social Security question, Tom Margenau has a book with all the answers. It's called "Social Security: Simple and Smart." You can find the book at, or look for it on Amazon or other book outlets. To find out more about Tom Margenau and to read past columns and see features from other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at




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