How Much Extra Can You Make on Social Security?

As individuals approach retirement, Social Security benefits often become a significant part of their financial planning. Many consider working during retirement, and understanding how earnings interact with Social Security is crucial. Continued employment can affect the amount of Social Security payments received, particularly before reaching full retirement age. These rules balance work incentives with the program’s purpose of providing retirement income.

Earnings Limits Before Full Retirement Age

For individuals receiving Social Security benefits before their full retirement age (FRA), annual earnings limits apply. If earnings exceed these limits, a portion of benefits will be temporarily withheld. For 2025, if an individual is under FRA for the entire year, the annual earnings limit is $23,400. For every $2 earned above this threshold, $1 will be deducted from benefits.

A different, higher earnings limit applies in the calendar year an individual reaches their full retirement age. For 2025, this specific limit is $62,160. In this situation, $1 in benefits is withheld for every $3 earned above the limit. Only earnings accumulated in the months before reaching full retirement age are counted against this higher limit. Earnings from the month an individual reaches full retirement age and onwards are not subject to these limits.

These earnings tests ensure Social Security primarily supports those who have substantially reduced their work income or fully retired. The Social Security Administration (SSA) reviews reported earnings annually to determine benefit adjustments. Failure to report earnings accurately can lead to overpayments, which the SSA will seek to recover.

Earnings at Full Retirement Age and Beyond

Once an individual reaches their full retirement age (FRA), earnings limits no longer apply. Beneficiaries can earn any amount from work without their Social Security benefits being reduced. This provides greater flexibility for individuals who wish to continue working full-time or part-time without impacting their Social Security payments.

Full retirement age is determined by an individual’s birth year. For those born in 1960 or later, FRA is 67. For individuals born between 1943 and 1954, it is 66, with a gradual increase for birth years between 1955 and 1959. Reaching this age signifies a shift in how the Social Security Administration views continued employment in relation to benefits.

This policy ensures individuals who have reached their full retirement age can maximize income from both Social Security and employment. It removes the disincentive of benefit reductions that applies to younger beneficiaries. The transition to no earnings limits at FRA is a key feature, allowing for greater financial autonomy in later retirement.

Types of Income That Count

For Social Security’s earnings test, only specific types of income are considered “earnings.” This primarily includes wages from employment or net earnings from self-employment. If an individual works for an employer, their gross wages, before any deductions for taxes or other contributions, are counted. For self-employed individuals, it is their net earnings after allowable business deductions that are considered.

Certain types of income are explicitly excluded from the earnings test. These include pensions, annuities, investment income such as interest and dividends, and capital gains. Other government benefits, such as veterans’ benefits or Supplemental Security Income (SSI), also do not count towards the earnings limits. This distinction is important for beneficiaries to accurately assess how their various income streams might affect their Social Security payments.

The focus on earned income ensures the earnings test targets income derived from active work rather than passive income sources. This helps to differentiate between individuals who are actively working and those who are drawing from retirement savings or other non-work-related financial assets. Understanding these distinctions is fundamental for effective financial planning while receiving Social Security benefits.

How Withheld Benefits Are Restored

Benefits withheld due to exceeding earnings limits before full retirement age are not permanently lost. Instead, the Social Security Administration (SSA) restores these benefits once the individual reaches their full retirement age. This restoration occurs through a recalculation of the monthly benefit amount.

When a person reaches full retirement age, the SSA reviews their earnings record and the amount of benefits that were withheld. The agency then adjusts the individual’s monthly benefit to account for those previously withheld amounts. This adjustment results in a higher monthly benefit payment going forward for the remainder of the individual’s life. The recalculation credits the individual for the months in which benefits were reduced or entirely withheld, as if they had claimed benefits later.

This adjustment ensures individuals are not penalized indefinitely for working while receiving benefits before their full retirement age. While withheld funds are not returned as a lump sum, the increase in future monthly payments over time compensates for earlier reductions. This provides a long-term benefit for those who experienced the earnings test.