It’s a common question for retirees and those approaching retirement: “How Much Money Can I Make While On Social Security without reducing my benefits?” The good news is that Social Security allows you to work and still receive benefits. In fact, working can even lead to a higher benefit amount in the long run. However, it’s important to understand the earnings limits, especially if you are younger than full retirement age.
Working while receiving Social Security retirement or survivors benefits can be beneficial. Each year, the Social Security Administration (SSA) reviews earnings records. If your earnings from the previous year are among your highest, they will recalculate your benefit, potentially increasing your monthly payments. This increase is applied retroactively to January of the year after you earned the money, meaning you could receive back pay. For those receiving survivors benefits, additional earnings might even lead to a higher retirement benefit than your current survivors benefit.
Understanding the Social Security Earnings Limit
When you start receiving Social Security retirement benefits, the SSA considers you retired. While you can work and receive benefits simultaneously, there are earnings limits if you haven’t reached your full retirement age. These limits dictate how much you can earn before your benefits are reduced.
If you are younger than your full retirement age for the entire year, there’s an annual earnings limit. In 2025, this limit is $23,400. For every $2 you earn above this limit, $1 will be deducted from your Social Security benefit payments.
In the year you reach your full retirement age, a different, higher limit applies, but only for earnings before the month you reach full retirement age. For 2025, this limit is $62,160. For every $3 you earn above this threshold, $1 will be deducted from benefits. Crucially, only earnings up to the month before you reach full retirement age are counted towards this limit; earnings after that month are not.
There’s also a special rule for the first year of retirement. If your earnings exceed the annual limit, but you were considered “retired” for at least one whole month within that year, you can still receive your full Social Security benefit for those months. This rule ensures that you aren’t penalized for a high-earning year if you significantly reduce your work hours upon retirement.
It’s also important to note that if you are receiving survivors benefits, the SSA uses your full retirement age for retirement benefits when applying the annual earnings test. This rule applies even if you are not entitled to retirement benefits on your own record.
For a deeper dive into how work affects your benefits, the SSA publication “How Work Affects Your Benefits” offers comprehensive information.
How Earnings Deductions Work: Examples
To illustrate how the earnings limit affects your benefits, let’s consider a few scenarios for 2025, assuming you receive $800 per month in Social Security retirement benefits (or $9,600 annually).
Scenario 1: Under Full Retirement Age All Year
- You are under full retirement age for all of 2025.
- Your annual earnings are $32,320, which is $8,920 above the $23,400 annual limit.
- Your Social Security benefits will be reduced by $4,460 ($1 for every $2 over the limit).
- You will receive $5,140 in benefits for the year ($9,600 – $4,460 = $5,140).
Scenario 2: Reaching Full Retirement Age in August 2025
- You reach full retirement age in August 2025.
- Your earnings for January through July are $63,000, which is $840 above the $62,160 limit for earnings before reaching full retirement age.
- Your Social Security benefits will be reduced by $280 ($1 for every $3 over the limit) for the months before August.
- You will receive $5,320 out of your potential $5,600 in benefits for January to July ($5,600 – $280 = $5,320).
- Starting in August 2025, when you reach full retirement age, you will receive your full $800 monthly benefit, regardless of how much you earn for the rest of the year.
Important Note on What Counts as Earnings:
When calculating earnings for the limit, the SSA considers wages from employment and net profit from self-employment. This includes bonuses, commissions, and vacation pay. However, certain types of income are not counted, such as pensions, annuities, investment income, interest, veterans benefits, or other government or military retirement benefits.
If you are eligible for retirement benefits and still working, you can use the SSA’s earnings test calculator to estimate how your earnings might affect your benefit payments.
No Earnings Limit at Full Retirement Age
Once you reach your full retirement age, the earnings limit disappears. Beginning in the month you reach full retirement age, you can earn any amount of money without any reduction in your Social Security benefits. Furthermore, the SSA will recalculate your benefit amount to give you credit for any months your benefits were reduced or withheld due to excess earnings before reaching full retirement age. This ensures that you eventually receive the full value of your contributions, even if you worked while receiving benefits before full retirement age.
Understanding these rules is crucial for planning your retirement finances and making informed decisions about working while receiving Social Security benefits. While there are limits before full retirement age, working can still be financially advantageous and may even increase your future Social Security benefits.
