Understanding how your earnings impact your Social Security benefits is crucial for retirement planning. This guide explains the earnings limits, how deductions work, and what happens when you reach full retirement age. Knowing these rules can help you maximize your benefits while still enjoying an active working life.
Working While Receiving Social Security: The Basics
Yes, you can work while receiving Social Security retirement or survivors benefits. In fact, continuing to work can potentially increase your future benefits. The Social Security Administration (SSA) reviews beneficiary records annually. If your most recent year of earnings is among your highest, the SSA recalculates your benefit, potentially resulting in a higher payout retroactively to January of the following year.
This is particularly relevant if you are receiving survivor’s benefits, as additional earnings may lead to a higher retirement benefit than your current survivor’s benefit.
Earning Limits and Benefit Reduction
When you start receiving Social Security retirement benefits, the SSA considers you retired. While you can work and receive benefits simultaneously, there are limits to how much you can earn without impacting your full benefit amount. If you’re younger than your full retirement age, exceeding the yearly earnings limit may lead to a reduction in your benefits.
For those under full retirement age for the entire year, the SSA deducts $1 from your benefit payment for every $2 earned above the annual limit. In 2025, this limit is $23,400.
In the year you reach full retirement age, the deduction changes to $1 for every $3 earned above a different limit. For 2025, this limit is $62,160. Importantly, the SSA only counts earnings up to the month before you reach full retirement age, not your earnings for the entire year.
If your earnings exceed the annual limit, a special rule may apply in your first year of retirement. This rule allows you to receive a full Social Security benefit for any whole month the SSA considers you 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 (AET), even if the full retirement age for survivor’s benefits is earlier.
How the SSA Deducts Earnings From Benefits
In 2025, the annual earnings limit for those under full retirement age is $23,400. If you reach full retirement age in 2025, the limit on your earnings for the months before reaching that age is $62,160. After you reach full retirement age, there’s no limit on how much you can earn without affecting your benefits.
Let’s examine a couple of examples:
-
Scenario 1: Under Full Retirement Age All Year
Imagine you receive $800 per month in Social Security retirement benefits ($9,600 annually) and remain under full retirement age throughout 2025. You work and earn $32,320, exceeding the $23,400 limit by $8,920.
The SSA would reduce your benefits by $4,460 ($1 for every $2 earned above 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)
-
Scenario 2: Reaching Full Retirement Age in August 2025
You are entitled to $800 per month in benefits ($9,600 annually). You reach full retirement age in August 2025. You work and earn $69,000 during the year, with $63,000 earned 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 earned above the limit). You would receive $5,320 out of your $5,600 benefits for the first 7 months. ($5,600 – $280 = $5,320).
From August 2025 onward, upon reaching full retirement age, you would receive your full benefit ($800 per month), regardless of your earnings.
When calculating deductions from your benefits, the SSA counts only wages from your job or net profit from self-employment. This includes bonuses, commissions, and vacation pay. Notably, the SSA doesn’t count pensions, annuities, investment income, interest, veterans benefits, or other government or military retirement benefits.
Reaching Full Retirement Age: A New Chapter
Upon reaching full retirement age, significant changes occur:
- Your earnings no longer reduce your benefits, regardless of how much you earn.
- The SSA recalculates your benefit amount to credit you for the months they reduced or withheld benefits due to excess earnings.
Maximize Your Social Security Benefits
Understanding the earnings limits and how they affect your Social Security benefits is essential for smart retirement planning. By strategically managing your earnings and understanding the rules surrounding full retirement age, you can maximize your benefits and secure your financial future.
Consider using the SSA’s earnings test calculator to estimate how your earnings might affect your benefit payments. Remember to consult the official SSA resources and seek personalized financial advice for tailored guidance.
