How Many Hours Can You Work When You Retire?
Understand how working in retirement affects your Social Security benefits. Navigate the rules for earning income while receiving payments.
When individuals consider retirement, a common question arises regarding the ability to continue working while receiving Social Security benefits. It is possible to combine work and receive these benefits, but certain rules govern how earned income might affect the benefit amount. Understanding these regulations helps individuals make informed financial decisions. The impact of working on Social Security benefits depends primarily on an individual’s age and the amount of income earned from employment.
Social Security Earnings Limit Before Full Retirement Age
Individuals who begin receiving Social Security benefits before reaching their Full Retirement Age (FRA) are subject to an earnings limit. This limit determines how much income can be earned from work before benefits are reduced. For 2025, if an individual is under their FRA for the entire year, the annual earnings limit is $23,400. For every two dollars earned above this limit, one dollar will be withheld from Social Security benefits.
A special rule applies in the first year of retirement: a full Social Security check can be received for any month the Social Security Administration considers the individual retired, even if annual earnings exceed the limit. This means if monthly earnings fall below a specific threshold, currently $1,950 for those under FRA in 2025, benefits may still be paid for those months.
Earnings and Benefits at Full Retirement Age and Beyond
The rules concerning earned income change significantly once an individual reaches their Full Retirement Age (FRA). Full Retirement Age is not a single age for everyone; it varies based on the year of birth. For instance, individuals born in 1960 or later have an FRA of 67, while those born in 1959 have an FRA of 66 and 10 months. This age represents the point at which an individual can receive 100% of their Social Security benefits based on their earnings record.
In the calendar year an individual reaches FRA, a different, higher earnings limit applies for the months prior to their birth month. For 2025, this limit is $62,160. During this period, one dollar in benefits will be withheld for every three dollars earned above this higher limit.
Once an individual reaches their designated Full Retirement Age, the Social Security earnings limit no longer applies, allowing them to earn any amount without their Social Security benefits being reduced. Any benefits previously withheld due to earning above the limits before FRA are not forfeited; the Social Security Administration will recalculate the monthly benefit amount to account for these withheld funds, leading to a higher ongoing payment.
Types of Income Subject to the Earnings Limit
The Social Security earnings limit specifically applies to income derived from work. This includes wages received from an employer, such as salary, bonuses, commissions, and vacation pay. For individuals who are self-employed, the earnings limit applies to their net earnings from self-employment. Conversely, many other types of income do not count towards the Social Security earnings limit. These non-earned income sources include pensions, annuities, and various forms of investment income like interest, dividends, and capital gains. Rental income is also generally excluded, unless it is actively derived from a trade or business. Additionally, withdrawals from retirement accounts, such as 401(k)s and Individual Retirement Accounts (IRAs), as well as other government benefits like veterans’ benefits or unemployment compensation, are not considered in the earnings limit calculation.
Reporting Earnings to Social Security and Benefit Adjustments
Individuals receiving Social Security benefits while working have a responsibility to report their estimated earnings to the Social Security Administration (SSA). This proactive reporting helps prevent overpayments and ensures that benefit adjustments are made in a timely manner. While the SSA primarily uses W-2 forms and self-employment tax returns for final earnings reconciliation, reporting estimated earnings beforehand is advisable.
There are several methods available for reporting earnings to the SSA. Individuals can report by calling the SSA’s toll-free number, visiting a local Social Security office, or utilizing their online My Social Security account.
If earnings exceed the applicable limit, the SSA will withhold benefits. This withholding typically occurs by stopping checks until the estimated overpayment is recouped. After the tax year ends and actual earnings are confirmed, the SSA conducts an annual review to make any necessary adjustments for overpayments or underpayments. Failing to report earnings accurately can result in overpayments that must be repaid, and in some cases, can lead to penalties.