How Much Can I Earn While Drawing Social Security?

Many individuals choose to continue working while receiving Social Security retirement benefits. While it is possible to work and receive benefits simultaneously, earning income can affect the amount of benefits received, especially if you have not yet reached your Full Retirement Age (FRA). The Social Security Administration (SSA) has specific rules in place to manage this, involving earning thresholds and processes that determine how your benefits might be adjusted.

Understanding Social Security Earning Limits

The Social Security Administration (SSA) sets annual earning limits if you receive benefits before reaching your Full Retirement Age (FRA). Your Full Retirement Age is determined by your birth year, and for those born in 1960 or later, it is age 67. Exceeding these limits can lead to a temporary reduction in your Social Security benefits.

For 2025, if you are younger than your FRA for the entire year, the annual earnings limit is $23,400. The SSA deducts $1 from your benefits for every $2 you earn above this threshold. If you reach your FRA in 2025, a higher limit of $62,160 applies to earnings made in the months before you reach your FRA. The SSA deducts $1 from your benefits for every $3 you earn above this amount. Once you reach your FRA, there are no earning limits, and you can earn any amount without your benefits being reduced.

The types of income that count toward these limits include wages from employment and net earnings from self-employment. Income sources such as pensions, annuities, investment income, interest, and capital gains generally do not count. For self-employed individuals, the SSA also considers the amount of work performed in the business to determine if you are considered “retired.”

A special “monthly earnings test” applies for one year, typically the first year you begin receiving benefits. This rule allows you to receive a full Social Security check for any month you are considered “retired,” regardless of your yearly earnings. For example, in 2025, if you are under FRA for the entire year, you are considered retired if your monthly earnings are $1,950 or less. This provision helps those who retire mid-year after earning more than the annual limit.

How Benefit Reductions Are Applied

If you are under your Full Retirement Age (FRA) for the entire year, the Social Security Administration (SSA) withholds $1 from your benefits for every $2 you earn above the annual limit. For instance, if you earn $1,600 over the $23,400 limit in 2025, $800 would be withheld from your Social Security payments. The SSA typically withholds entire benefit checks until the overage is recouped.

In the year you reach your FRA, a different reduction rate applies before the month of your birthday. The SSA deducts $1 from your benefits for every $3 you earn above the higher limit of $62,160. For example, if you earn $6,000 above this limit in the months leading up to your FRA, your benefits would be reduced by $2,000. The SSA continues to withhold checks until this amount is covered.

It is important to understand that these benefit reductions are not permanent losses; instead, they represent a temporary withholding. Once you reach your Full Retirement Age, the SSA recalculates your benefit amount to give you credit for the months or amounts that were withheld due to excess earnings. This adjustment results in a higher monthly benefit amount for the remainder of your life, effectively “paying back” the benefits that were initially withheld. The recalculation typically occurs around October of the year following the year in which the earnings were reported, and any increase is paid retroactively to January of that year.

Taxation of Social Security Benefits

Your Social Security benefits may be subject to federal income tax, determined by your “Provisional Income,” which is a calculation used by the Internal Revenue Service (IRS). Provisional Income is your Adjusted Gross Income (AGI) plus any tax-exempt interest income, plus one-half of your Social Security benefits.

The amount of taxable benefits depends on your filing status and Provisional Income thresholds. For single filers, if your Provisional Income is between $25,000 and $34,000, up to 50% of your benefits may be taxed. If your Provisional Income exceeds $34,000, up to 85% of your Social Security benefits may be taxable.

For those married filing jointly, if your Provisional Income falls between $32,000 and $44,000, up to 50% of your benefits may be taxable. If your Provisional Income is above $44,000, up to 85% of your Social Security benefits can be taxed. These income thresholds are not adjusted for inflation, meaning that as incomes rise over time, more beneficiaries may find a portion of their benefits subject to taxation.

In addition to federal taxation, some states also impose taxes on Social Security benefits. While specific state laws vary, it is advisable for beneficiaries to consult their state’s tax regulations to determine any potential state income tax liability on their benefits. The Social Security Administration issues Form SSA-1099 each January, showing total benefits received and any federal income tax withheld.

Reporting Earnings to Social Security

Accurately reporting your earnings to the Social Security Administration (SSA) is an important procedural step for beneficiaries who continue to work. Prompt and precise reporting helps ensure that you receive the correct benefit amount and can prevent potential overpayments or underpayments. You should notify the SSA whenever you start or stop working, or if your estimated earnings change.

You can report your earnings to the SSA through several convenient methods. One common way is using your “my Social Security” online account, which provides a secure portal for submitting wage information. Alternatively, you may report earnings by phone or by visiting a local Social Security office. Be prepared to provide details such as your estimated annual earnings and employment start or stop dates.

The SSA uses your reported earnings to reconcile against actual earnings, typically submitted by employers through annual wage reports. This reconciliation helps the SSA determine if adjustments are needed for your benefits. Keeping records, such as pay stubs and notes about when and how you reported your earnings, can be beneficial for your personal records and for any future inquiries.