How Much Can You Earn and Still Draw Social Security?

Social Security retirement benefits are designed to provide a financial foundation for individuals in their later years. While many envision a complete cessation of work upon retirement, continuing to earn income can sometimes affect the amount of Social Security benefits received. The mechanism governing this interaction is known as the “earnings test” or “retirement earnings limit,” which sets thresholds for how much can be earned before benefits are adjusted. Understanding these limits is important for anyone planning to work while receiving Social Security payments.

Earnings Limits Before Full Retirement Age

For individuals who begin receiving Social Security benefits before reaching their full retirement age, there are specific limits on how much they can earn from work each year. In 2025, if you are younger than your full retirement age for the entire year, the annual earnings limit is $23,400. Exceeding this amount results in a reduction of Social Security benefits. Specifically, for every two dollars earned above this limit, one dollar is withheld from your Social Security payments.

For instance, if a beneficiary is under full retirement age throughout 2025 and earns $25,400, which is $2,000 over the $23,400 limit, their Social Security benefits would be reduced by $1,000. The full retirement age varies depending on an individual’s birth year; for those born in 1960 or later, it is 67. Individuals born between 1943 and 1959 have a full retirement age between 66 and 66 and 10 months.

Earnings Limits In The Year You Reach Full Retirement Age

A different, higher earnings limit applies during the calendar year a beneficiary reaches their full retirement age. In 2025, this specific annual limit is $62,160. The reduction rule for this period is also more lenient: one dollar is withheld from Social Security benefits for every three dollars earned above this limit. Crucially, only earnings accumulated before the month of reaching full retirement age are counted towards this limit.

Once the beneficiary reaches their full retirement age month, the earnings limit no longer applies for the remaining months of that year or any subsequent year. For example, if someone reaches their full retirement age in August 2025 and earns $63,000 between January and July, which is $840 above the $62,160 limit, their Social Security benefits would be reduced by $280 ($840 / 3). Starting in August, their earnings would no longer affect their Social Security payments.

Earnings After Full Retirement Age

Once an individual reaches their full retirement age, the Social Security earnings limit no longer applies. This means beneficiaries can earn any amount of income from work without their Social Security benefits being reduced or withheld. Knowing one’s full retirement age is important, as it marks when earnings restrictions are lifted.

Types of Income That Count

For the purpose of the Social Security earnings test, only specific types of income are considered “earnings.” This primarily includes “earned income” derived from wages received from an employer or net earnings obtained from self-employment. Gross wages, which are earnings before deductions for taxes or retirement plans, are counted. For self-employed individuals, net earnings from their business are considered.

Conversely, many other forms of income do not count towards these earnings limits. These include pensions, annuities, investment income such as dividends and interest, capital gains from selling assets, and rental income. Other government benefits, like Veterans Benefits, also do not affect Social Security earnings limits.

Adjustments for Withheld Benefits

When Social Security benefits are withheld due to a beneficiary exceeding the earnings limit, these funds are not permanently lost. Instead, once the individual reaches their full retirement age, their Social Security benefit amount is recalculated. This recalculation takes into account the months or amounts that were withheld, effectively giving the beneficiary credit for those deductions. The result is a higher monthly benefit amount for the remainder of their life.

This adjustment compensates for earlier reductions, ensuring the beneficiary eventually receives the full value of their earned benefits. It is essential for beneficiaries to accurately report their earnings to the Social Security Administration. Doing so helps prevent potential overpayments, which would need to be repaid, or underpayments, which could delay receiving the correct benefit amount. The Social Security Administration reviews earnings records annually and automatically refigures benefits if higher earnings from a recent year would increase the benefit amount.