Navigating retirement can be complex, especially when it comes to Social Security benefits and working. Many people wonder, “How Much Money Can You Make While Drawing Social Security without reducing your benefits?” It’s a common and important question for those looking to supplement their income during retirement. The good news is, you can work and receive Social Security benefits at the same time. In fact, continuing to work might even increase your future benefits. Let’s clarify the earnings limits and how they might affect your Social Security payments.
Working While Receiving Social Security: The Basics
The Social Security Administration (SSA) considers you retired when you start receiving retirement benefits, but that doesn’t mean you have to stop working. You can absolutely receive Social Security retirement or survivors benefits and still be employed. However, there are earnings limits if you are younger than full retirement age. These limits determine whether your benefits will be reduced.
Earnings Limits Explained for Those Under Full Retirement Age
If you haven’t reached your full retirement age yet, there’s an annual earnings limit. Exceeding this limit can lead to a temporary reduction in your Social Security benefits. For those under full retirement age for the entire year, the SSA will deduct $1 from your benefit payments for every $2 you earn above the annual limit.
For 2025, this annual earnings limit is $23,400.
This means if you earn more than $23,400 in 2025 and are under full retirement age for the entire year, your benefits will be reduced.
Earnings Limits in the Year You Reach Full Retirement Age
The rules are slightly different in the year you reach full retirement age. In this year, the deduction is $1 in benefits for every $3 you earn above a higher limit.
In 2025, this limit on your earnings is $62,160.
It’s important to note that for this calculation, the SSA only counts earnings up to the month before you reach your full retirement age. Earnings from the month you reach full retirement age and beyond are not counted towards this limit.
The Special Rule for Your First Year of Retirement
There’s also a special rule that can apply in your first year of retirement. If your earnings will exceed the annual limit, but you are considered retired for at least one whole month during the year, this rule can be beneficial. It allows you to receive a full Social Security benefit for any whole month you are considered retired, regardless of your total yearly earnings. This rule can be particularly helpful if you stop working mid-year. You can find more details about this special rule on the SSA website.
Survivors Benefits and Earnings Limits
If you are receiving survivors benefits, the same earnings test applies. 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 might typically be earlier. This means the earnings limits and reduction rules are the same whether you are receiving retirement benefits or survivors benefits.
For a comprehensive understanding of how work affects your benefits, the SSA publication “How Work Affects Your Benefits” is a valuable resource.
No Earnings Limit at Full Retirement Age
Once you reach your full retirement age, the earnings limits disappear.
Beginning 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.
This is a significant change and provides greater financial flexibility for retirees who choose to continue working.
Benefit Recalculation and Potential Increase
Even if your benefits are reduced due to earnings before full retirement age, it’s not a permanent loss. The SSA reviews earnings records annually. If your earnings in a later year are higher than one of your previous years used to calculate your initial benefit, your benefit will be recalculated, and you may receive an increase. This increase is retroactive to January of the year following the year you earned the money. This means working can potentially lead to higher Social Security benefits over time.
For those receiving survivors benefits, increased earnings can potentially lead to a higher retirement benefit in the future, possibly exceeding the survivors benefit amount.
Examples of How Earnings Affect Benefits
Let’s illustrate how these earnings limits work with a couple of examples for 2025:
Example 1: Under Full Retirement Age All Year
- Scenario: You are under full retirement age for all of 2025 and receive $800 per month in Social Security benefits ($9,600 annually). You earn $32,320 during the year, which is $8,920 over the $23,400 annual limit.
- Benefit Reduction: Your Social Security benefits will be reduced by $4,460 ($1 for every $2 earned over the limit).
- Benefits Received: You will receive $5,140 in Social Security benefits for the year ($9,600 – $4,460 = $5,140).
Example 2: Reaching Full Retirement Age in August 2025
- Scenario: You reach full retirement age in August 2025 and are entitled to $800 per month in benefits ($9,600 annually). You earn $69,000 for the year, with $63,000 earned from January through July (before reaching full retirement age). This is $840 over the $62,160 limit for the year you reach full retirement age.
- Benefit Reduction: Your Social Security benefits will be reduced through July by $280 ($1 for every $3 earned over the limit).
- Benefits Received Before Full Retirement Age: You will receive $5,320 out of $5,600 in benefits for the first 7 months ($5,600 – $280 = $5,320).
- Benefits Received After Full Retirement Age: 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.
What Earnings Count Towards the Limit?
It’s important to understand what types of income count towards the earnings limit. The SSA only counts wages from your job or net profit from self-employment. This includes:
- Salaries
- Wages
- Bonuses
- Commissions
- Vacation pay
The following types of income are NOT counted towards the earnings limit:
- Pensions
- Annuities
- Investment income
- Interest
- Veterans benefits
- Other government or military retirement benefits
Use the Earnings Test Calculator
If you are eligible for Social Security retirement benefits and are still working, the SSA provides a helpful tool: the earnings test calculator. This calculator can help you estimate how your earnings might affect your benefit payments, allowing you to plan accordingly.
Conclusion: Working and Social Security Can Work Together
Understanding the rules about working while receiving Social Security is crucial for maximizing your retirement income. While earnings limits exist for those under full retirement age, they are designed to be flexible and allow you to supplement your benefits. Moreover, working can potentially increase your future Social Security benefits. Once you reach full retirement age, the earnings limit is removed entirely, giving you complete freedom to earn as much as you want without impacting your benefits. By understanding these guidelines, you can make informed decisions about working during retirement and ensure a financially secure future.
