How Much Can I Make While Drawing Social Security?
Maximize your financial situation by understanding the interplay between your work earnings and Social Security benefits.
Individuals approaching retirement or already receiving Social Security benefits often consider working. Understanding how earning income interacts with these benefits is important for financial planning. Rules affect the amount of Social Security benefits received and how they are taxed, depending on age and earnings. Navigating these regulations helps beneficiaries make informed decisions about continued employment.
Annual Earnings Limits
Individuals receiving Social Security benefits who have not yet reached their full retirement age (FRA) are subject to annual earnings limits. For 2025, if a person is under their full retirement age for the entire year, they can earn up to \$23,400 without their benefits being reduced. Once earnings exceed this threshold, a portion of the Social Security benefits will be withheld.
A different, higher earnings limit applies in the calendar year a person reaches their full retirement age. For 2025, this limit is \$62,160. This higher limit only applies to earnings in the months leading up to the month of the individual’s full retirement age. Earnings from the month a person reaches their full retirement age and onwards are not subject to any earnings limit.
These earnings limits are adjusted annually by the Social Security Administration (SSA) to account for changes in average wages. The figures provided are for 2025 and may change in subsequent years. Individuals should consult the SSA’s official website for the most current information.
How Earnings Reduce Benefits
When earnings exceed the specified annual limits, Social Security benefits are subject to reduction based on a set formula. If a person is under their full retirement age for the entire year, the SSA will deduct \$1 from their benefits for every \$2 earned above the annual limit. This means that if someone earns \$2,000 over the \$23,400 limit in 2025, their annual Social Security benefit would be reduced by \$1,000.
For the year a person reaches their full retirement age, a more lenient reduction rule applies to earnings made before their full retirement age month. The SSA deducts \$1 from benefits for every \$3 earned above the higher limit of \$62,160. Once full retirement age is reached, regardless of prior earnings in that year, there is no further reduction of benefits due to work. The SSA withholds entire monthly benefit payments until the total amount of excess earnings has been accounted for.
Income Subject to Limits
Not all types of income count toward the Social Security earnings limits. The limits primarily apply to “earned income,” which includes wages from a job or net earnings from self-employment. This means income from active work, such as salaries, hourly wages, bonuses, commissions, and vacation pay, is counted. For self-employed individuals, their net profit from their business is considered.
Conversely, many other forms of income do not count against these limits. These include pensions, annuities, and government retirement benefits. Investment income, such as interest, dividends, and capital gains from asset sales, also does not affect Social Security earnings limits. Other Social Security benefits received are excluded from the earnings test calculation.
Impact on Future Social Security Benefits
Benefits that are withheld due to exceeding the annual earnings limits are not permanently lost. The Social Security Administration keeps a record of these withheld amounts. When a beneficiary reaches their full retirement age, the SSA recalculates their benefit amount.
This recalculation accounts for months in which benefits were reduced or entirely withheld. This adjustment increases the individual’s monthly benefit payment going forward. Previously withheld benefits are credited back through a higher ongoing monthly payment. The annual recalculation also considers any new earnings that might improve the individual’s average indexed monthly earnings, leading to a further increase in benefits.
Taxation of Social Security Income
Beyond the earnings limits, Social Security benefits may be subject to federal income tax, a separate consideration. The taxability of benefits is determined by “provisional income.” Provisional income is calculated by taking an individual’s adjusted gross income (AGI), adding any tax-exempt interest, and adding one-half of the Social Security benefits received.
Federal tax thresholds dictate how much of the Social Security benefit is taxable. For single filers, if provisional income is between \$25,000 and \$34,000, up to 50% of Social Security benefits may be taxable. If provisional income exceeds \$34,000, up to 85% of benefits may be subject to federal income tax. For married couples filing jointly, the thresholds are higher; up to 50% of benefits may be taxable if provisional income is between \$32,000 and \$44,000. If their provisional income surpasses \$44,000, up to 85% of their Social Security benefits may be taxable.
These percentages refer to the portion of benefits that may be taxed, not the tax rate itself. The actual tax rate applied depends on an individual’s overall taxable income. Some states also tax Social Security benefits, with their own rules and thresholds. Beneficiaries should check their state’s tax laws, as they vary significantly.