How Much Can You Make on Social Security and Still Work?
Learn how earning income affects your Social Security benefits and what to consider when working while retired.
It is common for individuals to continue working while also receiving Social Security benefits. Understanding how earnings interact with Social Security benefits helps individuals make informed financial decisions.
Understanding Earnings Limits
Social Security imposes annual earnings limits for individuals working and receiving benefits before reaching their full retirement age (FRA). FRA is the age a person receives 100% of their Social Security benefits, varying by birth year. For those born in 1960 or later, FRA is 67; for those born between 1943 and 1954, it is 66, with incremental increases for birth years in between.
For beneficiaries not yet at their FRA for the entire year, the annual earnings limit in 2025 is $23,400. If earnings exceed this, the Social Security Administration (SSA) withholds $1 in benefits for every $2 earned above the limit.
A higher earnings limit applies in the year a beneficiary reaches their FRA. For 2025, this limit is $62,160. The SSA withholds $1 in benefits for every $3 earned above this limit, but only for earnings received before the month the individual reaches their FRA. Once a person reaches their FRA, there are no earnings limits, and they can earn any amount without their Social Security benefits being reduced.
How Earnings Affect Your Benefits
When a beneficiary’s earnings exceed the applicable annual limit, the Social Security Administration reduces their benefit payments. For example, if a person under their FRA earns $25,400 in 2025, they have exceeded the limit by $2,000. Under the $1 for $2 rule, $1,000 of their Social Security benefits would be withheld ($2,000 divided by 2). Similarly, in the year a person reaches their FRA, if they earn $65,160 before their FRA month, they have exceeded the $62,160 limit by $3,000. In this case, $1,000 of benefits would be withheld ($3,000 divided by 3).
The SSA withholds benefits by stopping monthly payments until the total amount of excess earnings has been recovered. This means a beneficiary might not receive any checks for a period. The duration of this stoppage depends on the amount of benefits that need to be withheld. These withheld benefits can lead to a recomputation of benefits at FRA, potentially increasing future monthly payments.
Income That Counts and Income That Doesn’t
For Social Security’s earnings test, “earnings” refers to wages from employment or net earnings from self-employment. This includes gross wages, salaries, commissions, bonuses, and other compensation for services. For self-employed individuals, net earnings after allowable business deductions are considered.
Many types of income do not count towards the Social Security earnings limit. These include pensions, government retirement benefits, and annuities. Investment income, such as interest, dividends, and capital gains from asset sales, also does not impact the earnings test. Other forms of income like rental income, workers’ compensation, unemployment benefits, and other government or private disability benefits are excluded.
An individual might have substantial income from a pension or investment portfolio, but as long as their earned income from wages or self-employment remains below the annual limit, their Social Security benefits will not be reduced by the earnings test. This allows for diverse income streams without affecting the benefit amount.
Reporting Earnings and Benefit Adjustments
When individuals begin receiving Social Security benefits while working, they are expected to accurately report their estimated earnings to the Social Security Administration (SSA). This initial reporting helps the SSA determine the correct benefit amount. If a beneficiary’s earnings change during the year, they must promptly inform the SSA to ensure proper benefit calculation.
Reporting can be done through various channels, including online via the SSA’s website, by phone, or by visiting a local Social Security office. If a beneficiary overestimates their earnings, they may receive less in benefits than they are due, resulting in an underpayment the SSA will later correct. Conversely, if earnings are underestimated, an overpayment may occur, which the SSA will then seek to recover, potentially by withholding future benefits.
At the beneficiary’s Full Retirement Age, the SSA performs a recomputation of their benefits. This process credits the individual for the months in which benefits were withheld due to the earnings test, potentially resulting in a higher monthly benefit amount for the remainder of their retirement.
Taxation of Social Security Benefits
Social Security benefits may also be subject to federal income tax, depending on an individual’s total income. The Internal Revenue Service (IRS) uses “provisional income” to determine the taxable portion of these benefits. Provisional income is calculated by adding your Adjusted Gross Income (AGI), any tax-exempt interest, and one-half of your Social Security benefits.
The amount of benefits subject to tax depends on provisional income thresholds, which vary by tax filing status. 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 taxable.
For those married filing jointly, different thresholds apply. If their combined provisional income is between $32,000 and $44,000, up to 50% of Social Security benefits may be taxable. If their provisional income is above $44,000, up to 85% of benefits may be taxable. Taxation of benefits is distinct from the earnings test; the earnings test reduces the amount of benefits received, while taxation affects the amount of those benefits included in taxable income.