How Much Can You Earn Before Social Security Is Reduced?
Understand the interplay between your work earnings and Social Security benefits, including limits and how adjustments are made.
Social Security benefits provide an important financial foundation for millions, but understanding how working can affect these payments is crucial for beneficiaries. While it is possible to receive Social Security benefits and continue to work, certain earnings thresholds may lead to a temporary reduction in benefit payments. Navigating these rules helps individuals plan their finances effectively to maximize their benefits.
Understanding Social Security Earnings Limits
Social Security establishes different annual earnings limits based on a beneficiary’s age relative to their Full Retirement Age (FRA). The Full Retirement Age is the specific age at which an individual can receive 100% of their Social Security benefits, determined by their birth year. For those born between 1943 and 1954, FRA is 66, gradually increasing for later birth years until it reaches 67 for individuals born in 1960 or later.
For beneficiaries who are under their Full Retirement Age for the entire year, a specific earnings limit applies. In 2025, this annual limit is $23,400. If earnings exceed this amount, Social Security will deduct $1 from benefit payments for every $2 earned above the limit. For example, if a beneficiary earns $25,000 in 2025 while being under FRA all year, the $1,600 over the limit ($25,000 – $23,400) would result in an $800 reduction in benefits ($1,600 / 2).
A different, higher earnings limit applies in the year a beneficiary reaches their Full Retirement Age. For 2025, this limit is $62,160. In this scenario, Social Security deducts $1 from benefits for every $3 earned above this limit, but only counts earnings accumulated before the month the individual reaches their FRA. Once a beneficiary attains their Full Retirement Age, there is no longer any limit on how much they can earn, and their Social Security benefits will not be reduced.
How Benefits Are Withheld
When a beneficiary’s earnings exceed the applicable limit, Social Security will withhold benefit payments rather than reducing each monthly check by a small amount. This means the agency will typically withhold entire monthly benefit payments until the total amount withheld equals the amount by which the benefits should be reduced. For instance, if a beneficiary’s annual benefits are $7,200 ($600 per month) and $800 needs to be withheld due to excess earnings, Social Security might withhold the first month’s payment ($600) and then a portion of the second month’s payment ($200) to reach the total amount.
Benefits withheld due to exceeding earnings limits are not permanently lost. Instead, the Social Security Administration (SSA) performs a recalculation of the beneficiary’s monthly benefit amount once they reach their Full Retirement Age. This recalculation credits the beneficiary for the months their benefits were withheld. The monthly benefit amount is then permanently increased to account for the previously withheld payments, ensuring the beneficiary eventually receives the full value of their earned benefits.
This recalculation adjusts the benefit amount to reflect a longer work history. Future monthly payments will be higher than if no benefits were withheld. The SSA automatically performs these adjustments, applying any necessary increases retroactively to January of the year following the earnings.
Income That Counts Towards the Limit
The Social Security earnings test applies to “earned income” from work. This includes gross wages received from employment. For self-employed individuals, net earnings from self-employment are counted. Bonuses, commissions, and vacation pay are also considered earned income.
Many other types of income do not count towards the Social Security earnings limit. This includes income from pensions, annuities, and investment income such as interest, dividends, or capital gains. Government or military retirement benefits are also excluded from the earnings test. Furthermore, rental income, deferred compensation, and unemployment benefits do not affect Social Security payments.
Reporting Earnings and Benefit Adjustments
Beneficiaries have a responsibility to report their earnings to the Social Security Administration to ensure accurate benefit payments. The SSA tracks earnings primarily through W-2 forms submitted by employers and self-employment tax returns. Beneficiaries should proactively inform Social Security about their expected annual earnings when they first apply for benefits or if their earnings significantly change during the year.
If a beneficiary earns more than expected and receives an overpayment of benefits, Social Security may request repayment directly or choose to withhold future benefit payments until the overpayment is recovered. Conversely, if a beneficiary earns less than anticipated, leading to an underpayment, the SSA will adjust future payments to compensate. The agency reviews earnings records. If current earnings are among the highest 35 years of a beneficiary’s work history, their monthly benefit amount may be recalculated and increased. This recalculation is performed automatically, with any benefit increases applied retroactively.