How Much Can You Make Collecting Social Security?
Discover the core principles and individual factors that determine your Social Security retirement income. Learn how to understand and potentially optimize your benefit.
Social Security serves as a fundamental social insurance program for millions of Americans, offering benefits for retirement, disability, and survivorship. The amount an individual receives varies significantly, depending on personal circumstances and financial decisions made throughout their working life. Understanding these factors is an important step in financial planning.
Key Factors Influencing Your Benefit
Your Social Security benefit amount is shaped by your earnings history, your Full Retirement Age (FRA), and the age you choose to claim benefits. These elements determine the base amount you are eligible to receive.
The Social Security Administration (SSA) calculates your benefit using your highest 35 years of earnings. These earnings are “indexed” to account for changes in average wages over time, ensuring past earnings reflect their relative value. This indexing helps prevent the erosion of benefit value due to inflation. If you have fewer than 35 years of earnings, zero earnings are factored in for missing years, which can reduce your overall benefit.
Your Full Retirement Age (FRA) is the age at which you are entitled to receive 100% of your calculated Social Security benefit. This age depends on your birth year, typically ranging from 66 to 67.
The age you choose to claim benefits significantly impacts the amount you receive. You can start receiving benefits as early as age 62, but claiming before your FRA results in a permanent reduction. Conversely, delaying your claim past your FRA, up to age 70, increases your monthly benefit through delayed retirement credits. These credits can boost your benefit by about 8% for each year you delay.
How Your Benefit Amount Is Calculated
The Social Security Administration employs a process to determine your Primary Insurance Amount (PIA), which is the benefit you receive if you claim at your Full Retirement Age. This calculation begins with your lifetime earnings.
The first step involves calculating your Average Indexed Monthly Earnings (AIME). The SSA takes your highest 35 years of indexed earnings, sums them, and divides that total by 420. This AIME represents your average monthly earnings after adjusting for wage growth.
Once your AIME is determined, it is converted into your Primary Insurance Amount (PIA) using a progressive formula. This formula applies different percentages to specific portions of your AIME, known as “bend points.” This design ensures that lower-wage earners receive a proportionately higher benefit relative to their contributions.
Maximum Social Security Benefit
There is a maximum monthly Social Security benefit an individual can receive. This maximum amount varies each year and depends on an individual’s earnings history and claiming age.
To qualify for the maximum benefit, an individual must have consistently earned the maximum amount of income subject to Social Security taxes for at least 35 years. This taxable earnings limit, also known as the wage base limit, is set annually by the Social Security Administration. For example, in 2025, the wage base limit is $176,100.
Most individuals do not receive the maximum benefit because they either do not have 35 years of maximum taxable earnings or do not delay claiming until age 70.
Working While Receiving Benefits
Continuing to work while receiving Social Security benefits can impact your monthly payment, especially if you claim benefits before your Full Retirement Age (FRA). This is due to the Social Security Administration’s “earnings test.”
If you are under your FRA for the entire year and earn above a certain annual limit, your benefits will be temporarily reduced. For example, in 2025, the limit for those under FRA is $23,400, and $1 in benefits is withheld for every $2 earned above this threshold. If you reach your FRA within the year, a higher earnings limit applies to earnings made before the month you reach FRA. For 2025, this higher limit is $62,160, with $1 in benefits withheld for every $3 earned above it.
Any benefits withheld due to the earnings test are not permanently lost. Once you reach your FRA, your monthly benefit amount is recalculated to account for the benefits that were previously withheld. This recalculation results in a higher monthly payment. The earnings test no longer applies once you reach your FRA, meaning you can earn any amount without your Social Security benefits being reduced.
Taxation of Benefits
Social Security benefits can be subject to federal income tax, depending on your total income from all sources. This taxability is determined by what the Internal Revenue Service (IRS) refers to as your “combined income” or “provisional income.”
Combined income is calculated by adding your Adjusted Gross Income (AGI), any nontaxable interest income, and half of your Social Security benefits. Based on this combined income, specific thresholds determine how much of your benefits may be taxed. For individual filers, if combined income is between $25,000 and $34,000, up to 50% of benefits may be taxable. If combined income exceeds $34,000, up to 85% of benefits may be taxable.
For married couples filing jointly, different thresholds apply. If their combined income is between $32,000 and $44,000, up to 50% of their benefits may be taxable. If their combined income exceeds $44,000, up to 85% of their benefits may be taxable. Many people who primarily rely on Social Security for income may not pay federal taxes on their benefits. Some states also impose taxes on Social Security benefits, so it is advisable to check state-specific tax rules or consult a tax professional for personalized guidance.