How Much Can I Make and Still Draw Social Security?

Many individuals choose to continue working, at least part-time, even after they begin receiving these benefits. The Social Security Administration (SSA) has specific rules governing how earned income may impact benefits, particularly for those who have not yet reached their full retirement age. Understanding these regulations is important for individuals planning their retirement finances and managing their income streams.

Defining Countable Earnings and Limits

The Social Security Administration differentiates between types of income when determining how earnings affect benefits. Income considered “countable earnings” for the purpose of the earnings test primarily includes wages from employment and net earnings from self-employment.

Conversely, various other forms of income do not count against Social Security earnings limits. These non-countable sources include pensions, annuities, investment income, interest, dividends, capital gains, and gifts. For example, income received from a traditional pension plan or from dividends generated by a stock portfolio will not cause a reduction in Social Security benefits, regardless of the amount. The focus of the earnings test remains solely on income derived from active work.

The Social Security Administration sets specific annual earnings limits that determine whether benefits will be reduced. For beneficiaries who are younger than their full retirement age (FRA) for the entire year, the annual earnings limit for 2025 is $23,400. If earnings exceed this amount, a portion of the Social Security benefits will be withheld. This limit adjusts annually, reflecting changes in average wages.

A different, higher earnings limit applies to beneficiaries who will reach their full retirement age during the year. For 2025, this limit is $62,160. Only earnings received in the months before the individual reaches their full retirement age are counted towards this limit. Once the beneficiary reaches their full retirement age, the earnings limit no longer applies, and they can earn any amount without affecting their Social Security benefits.

The full retirement age itself varies depending on an individual’s birth year. For instance, for those born in 1960 or later, the full retirement age is 67. It is important to note that these earnings limits are distinct from the maximum taxable earnings subject to Social Security taxes, which is $176,100 in 2025. The earnings test exclusively concerns working income received while collecting benefits before FRA.

Impact of Exceeding Earnings Limits

When a Social Security beneficiary’s countable earnings exceed the applicable annual limit, their benefits are subject to reduction or withholding. The specific method of reduction depends on whether the individual is under their full retirement age for the entire year or reaches their full retirement age during the year. These withholding rules are designed to balance the purpose of Social Security as a retirement income source with the ability for beneficiaries to continue working.

For beneficiaries who are younger than their full retirement age for the entire year, the Social Security Administration withholds $1 in benefits for every $2 earned above the annual limit. For example, if the 2025 limit is $23,400 and someone earns $25,400, they have earned $2,000 over the limit. This would result in a $1,000 reduction in their Social Security benefits. This calculation ensures a direct relationship between excess earnings and benefit adjustment.

A more generous withholding formula applies to individuals who reach their full retirement age during the year. For these beneficiaries, the Social Security Administration withholds $1 in benefits for every $3 earned above a higher limit, which is $62,160 in 2025.

The benefits that are withheld due to exceeding earnings limits are not permanently lost. Instead, they are effectively ‘deferred’ and lead to a re-calculation of benefits at the individual’s full retirement age. This process is known as “benefit recomputation.” At full retirement age, the SSA recalculates the monthly benefit amount to account for any months where benefits were withheld due to the earnings test.

The Social Security Administration typically performs these recomputations automatically each year after receiving updated earnings information from tax records. This ensures that the beneficiary’s payment accurately reflects their earnings history. Exceeding earnings limits can also indirectly affect benefits for dependents or spouses who are receiving payments based on the same Social Security record, as their benefits are tied to the primary beneficiary’s entitlement.

Managing and Reporting Your Earnings

Accurately estimating and reporting earnings to the Social Security Administration (SSA) is a crucial responsibility for beneficiaries who work while receiving benefits. Estimating annual earnings helps prevent overpayments or underpayments of benefits.

Promptly notifying the SSA of any changes in earnings or work status is important. This includes starting a new job, changing work hours, experiencing a pay increase or decrease, or stopping work altogether. Reporting changes allows the SSA to adjust benefits in a timely manner, helping to avoid significant overpayments that would need to be repaid.

Several methods are available for reporting earnings to the SSA. Beneficiaries can report changes online through their “my Social Security” account, by telephone, via mail, or in person at a local Social Security office. For those receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), specific electronic wage reporting tools like the “my Wage Report (myWR)” are available for monthly reporting.

Maintaining detailed records of all reported earnings and communications with the SSA is a recommended practice. This includes keeping copies of pay stubs, receipts from the SSA confirming reports, and notes about when and how reports were made. Such records provide proof of compliance and can be helpful in resolving any discrepancies that may arise.

Failing to report earnings accurately or promptly can lead to various consequences. Under-reporting earnings may result in overpayments, requiring the beneficiary to repay the excess benefits received. Conversely, over-reporting could lead to underpayments, where a beneficiary receives less than they are entitled to, necessitating a correction. The SSA is generally required to provide a dated receipt for reported wages, and beneficiaries should request one if not automatically provided.