It’s a common question for those approaching or already in retirement: How Much Can You Earn While On Social Security without impacting your benefits? The Social Security Administration (SSA) allows you to work while receiving retirement or survivors benefits, but there are earning limits that could temporarily reduce your benefit amount. This article explains the rules, limits, and how your earnings can even lead to a higher benefit in the long run.
When you begin receiving Social Security retirement benefits, the SSA considers you retired. However, you can still work and receive benefits simultaneously. Keep in mind that earning above a certain limit can affect the amount of your benefits.
Understanding the Earnings Test
If you are younger than your full retirement age (FRA), your Social Security benefits may be reduced if your earnings exceed the yearly earnings limit. The SSA refers to this as the annual earnings test (AET).
- Under Full Retirement Age for the Entire Year: For every $2 you earn above the annual limit, $1 is deducted from your benefit payments. For 2025, that limit is $23,400.
- Reaching Full Retirement Age During the Year: For the year you reach FRA, the deduction is $1 for every $3 you earn above a different limit. In 2025, this limit on your earnings is $62,160. Notably, the SSA only counts your earnings up to the month before you reach your full retirement age.
There is a special rule that applies to earnings for 1 year if your earnings exceed the limit for the year and you are receiving retirement benefits for part of the year. The special rule allows the SSA to pay a full Social Security benefit for any whole month you are considered retired, regardless of your yearly earnings.
For survivors benefits, the SSA uses your full retirement age for retirement benefits when applying the annual earnings test, even if the full retirement age for survivors benefits is earlier. This applies even if the beneficiary is not entitled to retirement benefits.
For more detailed information, refer to the SSA publication, “How Work Affects Your Benefits.”
Important Note: If you are younger than full retirement age and working outside the United States, different rules apply. See “Your Payments While You Are Outside the United States” for details.
What Happens When You Reach Full Retirement Age?
The rules change significantly once you reach your full retirement age:
- No Earnings Limit: Beginning with the month you reach FRA, your earnings will no longer reduce your benefits, regardless of how much you earn.
- Benefit Recalculation: The SSA will recalculate your benefit amount to credit you for the months when your benefits were reduced or withheld due to excess earnings.
Examples of How Earnings Affect Benefits
Let’s illustrate with a few examples for the year 2025:
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Scenario 1: Under Full Retirement Age All Year
You are under full retirement age all year and entitled to $800 per month in benefits ($9,600 for the year). You work and earn $32,320, which is $8,920 more than the $23,400 limit. Your Social Security benefits would be reduced by $4,460 ($1 for every $2 you earned more than the limit). As a result, you would receive $5,140 of your $9,600 in benefits for the year ($9,600 – $4,460 = $5,140).
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Scenario 2: Reaching Full Retirement Age in August 2025
You are entitled to $800 per month in benefits ($9,600 for the year) and reach full retirement age in August 2025. You work and earn $69,000 during the year, with $63,000 earned in the seven months from January through July. This is $840 more than the $62,160 limit. Your Social Security benefits would be reduced through July by $280 ($1 for every $3 you earned more than the limit). You would receive $5,320 out of your $5,600 benefits for the first seven months ($5,600 – $280 = $5,320). Beginning in August 2025, when you reach full retirement age, you would receive your full benefit ($800 per month), no matter how much you earn.
What Counts as Earnings?
When calculating how much to deduct from your benefits, the SSA only counts the wages you make from your job or your net profit if you are self-employed. This includes bonuses, commissions, and vacation pay.
The SSA does not count pensions, annuities, investment income, interest, veterans benefits, or other government or military retirement benefits.
How Working Can Increase Your Social Security Benefit
Each year, the SSA reviews the records of all Social Security beneficiaries with reported wages for the previous year. If your latest year of earnings is among your highest years of earnings, the SSA will recalculate your benefit and pay you any increase you are due. This increase is retroactive to January of the year after you earned the money.
If you receive survivors benefits, the additional earnings could help make your retirement benefit higher than your current survivors benefit. This is because Social Security benefits are based on your lifetime earnings.
Use the Earnings Test Calculator
If you are eligible for retirement benefits this year and are still working, you can use the SSA’s earnings test calculator to estimate how your earnings might affect your benefit payments.
Maximizing Your Social Security Benefits
Understanding the earnings limits and how they affect your Social Security benefits is crucial for financial planning during retirement. While earning above the limit may temporarily reduce your benefits, remember that your benefits could increase due to a recalculation based on your lifetime earnings. Carefully consider your options and consult with a financial advisor to make informed decisions about working while receiving Social Security.
