How Much Can You Make and Still Get Social Security?
Clarify how your work earnings interact with Social Security benefits. Learn the nuances of income limits and age-based rules for recipients.
Social Security benefits serve as a financial support system for many Americans, providing income during retirement or due to disability. While these benefits are designed to offer a foundation of financial security, the regulations surrounding them can be intricate, particularly for individuals who continue to work. This article aims to clarify how earned income can interact with Social Security benefits, shedding light on the rules that govern potential reductions or adjustments based on continued employment.
Understanding Annual Earnings Limits
The Social Security Administration (SSA) establishes specific annual earnings limits that determine whether a beneficiary’s income will affect their Social Security payments. These limits are subject to change each year, reflecting economic adjustments. There are two distinct earnings limits that apply depending on a beneficiary’s age relative to their full retirement age (FRA). For individuals who are younger than their full retirement age for the entire year, a lower annual earnings limit applies. A higher earnings limit is in place for those who will reach their full retirement age during the year. This higher limit only applies to earnings received in the months before the beneficiary reaches their full retirement age.
How Earnings Affect Benefits
Exceeding the established annual earnings limits can lead to a reduction in Social Security benefits. The specific reduction formula depends on whether the beneficiary is before their full retirement age or in the year they reach it. For individuals who are younger than their full retirement age, the SSA withholds $1 in benefits for every $2 earned above the annual limit. For example, if the annual limit is $23,400 in 2025 and a beneficiary earns $25,400, which is $2,000 over the limit, their benefits would be reduced by $1,000 ($2,000 / 2).
A different reduction rule applies to those who reach their full retirement age during the year. In this scenario, $1 in benefits is withheld for every $3 earned above a higher annual limit. This calculation only considers earnings received in the months leading up to the beneficiary’s full retirement age. For instance, if the limit is $62,160 in 2025 for this group and a beneficiary earns $63,160 before their FRA month, their benefits would be reduced by approximately $333 ($1,000 / 3). Benefits withheld due to these earnings tests are not permanently lost; instead, the SSA recalculates the benefit amount at full retirement age, potentially leading to an increase in future monthly payments to account for previously withheld amounts.
Age-Specific Considerations
The impact of working on Social Security benefits varies significantly based on a beneficiary’s age relative to their full retirement age (FRA). For beneficiaries who are under their full retirement age for the entire year, the lower annual earnings limit applies. If earnings exceed this threshold, $1 in benefits is withheld for every $2 earned above the limit. This earnings test is applied to all months of the year, meaning that benefits can be reduced if annual earnings surpass the specified amount. For example, in 2025, if a person under FRA earns more than $23,400, their benefits will be reduced.
A distinct set of rules applies to beneficiaries in the year they reach their full retirement age. A higher annual earnings limit is applicable in this period. For 2025, this limit is $62,160. For every $3 earned over this limit, $1 will be withheld from benefits, but this only applies to earnings received before the month the beneficiary reaches their FRA.
A special “monthly earnings test” can also come into play for this specific year. This rule allows beneficiaries to receive a full Social Security check for any month in which their earnings fall below a certain monthly threshold, regardless of their total annual earnings, provided they are considered retired for that month. For instance, in 2025, a person reaching FRA could receive full benefits for months where their earnings are $5,180 or less, even if their annual earnings would otherwise exceed the yearly limit. This monthly test is usually applied only for the first year of retirement to prevent beneficiaries from being penalized for earnings accumulated earlier in the year before they stopped working or reduced their hours.
Once a beneficiary reaches their full retirement age and beyond, the earnings limits no longer apply. At this point, individuals can earn any amount from employment or self-employment without their Social Security benefits being reduced or withheld.
Defining Countable Earnings
Only specific types of income are considered “countable earnings” for the Social Security earnings test. This includes wages received from employment and net earnings from self-employment. Wages encompass salary, bonuses, commissions, and vacation pay. For self-employed individuals, the SSA counts the net profit generated from their business activities.
Conversely, many other forms of income are generally not counted against the Social Security earnings limits. These non-countable sources include, but are not limited to, pensions, annuities, and various forms of investment income such as interest, dividends, and capital gains. Other government retirement benefits, military retirement benefits, and distributions from retirement accounts like IRAs are also excluded from the earnings test calculation. Additionally, income earned prior to receiving Social Security benefits, even if paid out after benefits begin (such as accumulated sick or vacation pay), does not count towards the limit.