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.)
