Many individuals approaching retirement age or already receiving Social Security benefits wonder if they can still work and earn money without affecting their benefits. The good news is, yes, you can work while receiving Social Security retirement or survivors benefits. In fact, continuing to work could potentially increase your future benefits. However, it’s crucial to understand the earnings limits set by the Social Security Administration (SSA) to avoid benefit reductions, especially if you are under your full retirement age.
Understanding Social Security and Working: The Basics
The Social Security Administration considers you “retired” when you begin receiving retirement benefits, but this doesn’t mean you have to stop working altogether. You can absolutely receive retirement or survivors benefits and still be employed. The key consideration is how much you earn. Social Security has established earnings limits that, if exceeded, can lead to a temporary reduction in your benefit payments if you are below your full retirement age.
Annual Earnings Limit Before Full Retirement Age
For those who haven’t yet reached their full retirement age, there’s an annual limit on how much you can earn before your Social Security benefits are impacted. In 2025, this annual earnings limit is $23,400.
If your earnings go above this limit and you are under full retirement age for the entire year, Social Security will reduce your benefit amount. The reduction isn’t a complete loss, but rather a temporary adjustment. For every $2 you earn above the $23,400 annual limit, $1 will be deducted from your Social Security benefit payments.
For example, if you are entitled to Social Security benefits and earn $30,000 in 2025 while under full retirement age, you’ve exceeded the limit by $6,600 ($30,000 – $23,400 = $6,600). This means your benefits would be reduced by $3,300 ($6,600 / 2 = $3,300).
Earnings Limit in the Year You Reach Full Retirement Age
The rules are slightly different in the year you reach your full retirement age. There’s still an earnings limit, but it’s higher, and the calculation is different. In 2025, the earnings limit for the year you reach full retirement age is $62,160.
Crucially, this limit only applies to earnings before the month you reach your full retirement age. Social Security only counts your earnings up to the month before you reach full retirement age, not your earnings for the entire year.
In the year you reach full retirement age, for every $3 you earn above the $62,160 limit (earned before the month of reaching full retirement age), $1 will be deducted from your benefits.
For instance, if you reach full retirement age in August 2025 and earn $65,000 from January to July (before reaching full retirement age), you’ve exceeded the limit by $2,840 ($65,000 – $62,160 = $2,840). Your benefits would be reduced by $946.67 ($2,840 / 3 = $946.67) for the months prior to August.
No Earnings Limit at Full Retirement Age and Beyond
Once you reach your full retirement age, the earnings limits disappear entirely. Starting with the month you reach full retirement age, there is no limit on how much you can earn and still receive your full Social Security benefits. You can earn any amount without any reduction in your benefits.
Furthermore, even if your benefits were reduced in prior years due to earnings, once you reach full retirement age, Social Security will recalculate your benefit amount. They will give you credit for the months your benefits were reduced or withheld due to excess earnings. This recalculation can potentially increase your future monthly benefit amount.
How Earnings Deductions Work: Examples
Let’s illustrate these rules with a couple of examples based on the 2025 limits:
Example 1: Under Full Retirement Age All Year
Imagine you are under full retirement age throughout 2025 and are entitled to $800 per month in Social Security benefits (which is $9,600 annually). You work and earn $32,320 during the year.
- The annual earnings limit for 2025 is $23,400.
- You exceeded the limit by $8,920 ($32,320 – $23,400 = $8,920).
- Your Social Security benefits will be reduced by $4,460 ($8,920 / 2 = $4,460).
- You would receive $5,140 in benefits for the year ($9,600 – $4,460 = $5,140).
Example 2: Reaching Full Retirement Age in August 2025
Suppose you reach full retirement age in August 2025 and are entitled to $800 per month in benefits ($9,600 for the year). You earn $69,000 during the year, with $63,000 earned between January and July (before reaching full retirement age).
- The earnings limit for the months before reaching full retirement age in 2025 is $62,160.
- You exceeded this limit by $840 ($63,000 – $62,160 = $840).
- Your Social Security benefits will be reduced by $280 ($840 / 3 = $280) for the months from January to July.
- You would receive $5,320 out of your potential $5,600 benefits for the first seven months ($5,600 – $280 = $5,320).
- From August 2025 onwards (when you reach full retirement age), you would receive your full $800 monthly benefit, regardless of how much you continue to earn for the rest of the year.
What Counts as Earnings?
It’s important to understand what types of income Social Security counts as “earnings” for the purpose of these limits. Generally, only your wages from employment or your net profit if you are self-employed are counted. This includes:
- Salaries and wages
- Bonuses
- Commissions
- Vacation pay
- Net earnings from self-employment
The following types of income are generally NOT counted as earnings for Social Security earnings limits:
- Pensions
- Annuities
- Investment income (dividends, capital gains, etc.)
- Interest income
- Veterans benefits
- Other government or military retirement benefits
Planning Your Retirement Income
Understanding the Social Security earnings limits is crucial for retirement income planning. If you are approaching retirement age and plan to continue working, it’s wise to consider how your earnings might affect your Social Security benefits, especially before reaching your full retirement age.
To get an estimate of how your earnings could impact your benefits, Social Security provides an Earnings Test Calculator on their website. This tool can help you make informed decisions about working while receiving Social Security.
By understanding these rules, you can effectively manage your income in retirement, maximize your Social Security benefits over the long term, and enjoy a financially secure retirement.
