The earnings limit ($14,640 in 2012) is the amount of income that Social Security beneficiaries below full retirement age can earn without having $1 of benefits withheld for every $2 above this amount (which is adjusted annually for inflation). Starting at the beginning of the calendar year during which beneficiaries reach full retirement age, the earnings limit shoots up (to $38,880 in 2012 for earnings during months prior to attaining full retirement age), and benefits are reduced only $1 for every $3 over the earnings limit. Beginning the month beneficiaries actually reach full retirement age, there is no earnings limit. Full retirement age is the age at which beneficiaries receive an unreduced Social Security benefit. For many years, full retirement age was 65, but it has been gradually increasing and will reach 67 by 2027.
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