How Much Money Can I Earn While Collecting Social Security?
Navigate the complexities of earning income alongside Social Security to optimize your financial strategy and avoid unexpected benefit changes.
Understanding how earning income can affect Social Security benefits is important for those receiving or planning to receive them. The rules vary depending on an individual’s age relative to their full retirement age (FRA), which is the age at which they can receive their full, unreduced Social Security retirement benefit. Navigating these regulations helps individuals make informed decisions about working during retirement, preventing unexpected reductions in their benefit payments.
Earnings Limits and Benefit Withholding
The Social Security Administration (SSA) applies specific earnings limits that can impact benefit payments if an individual works while receiving Social Security, particularly before reaching their full retirement age. These limits are adjusted annually.
For individuals who are younger than their full retirement age for the entire year, the earnings limit in 2025 is $23,400. If earnings exceed this amount, the SSA will deduct $1 from their benefits for every $2 earned over the limit. For example, if an individual earns $25,400, which is $2,000 over the limit, their annual benefits would be reduced by $1,000. There is also a monthly test for those who begin benefits mid-year, where earnings of $1,950 or less in a month may allow full benefits for that month, regardless of higher annual earnings.
A different, higher earnings limit applies in the year an individual reaches their full retirement age. For 2025, this limit is $62,160. In this specific year, the SSA deducts $1 in benefits for every $3 earned above this limit, but only earnings in the months before the month of reaching full retirement age are counted towards this limit. For instance, if someone reaches FRA in August, only earnings from January through July count against the $62,160 limit. The monthly limit for this scenario is $5,180.
Once an individual reaches their full retirement age, there are no longer any earnings limits. This means that beginning with the month they attain their full retirement age, they can earn any amount of income without their Social Security benefits being reduced. Benefits that were withheld due to exceeding earnings limits before full retirement age are not permanently lost; they are factored into a recalculation of benefits, potentially leading to a higher monthly benefit amount in the future.
Defining What Counts as Earnings
The Social Security Administration has specific definitions for what constitutes “earnings” when applying the earnings limits. Generally, only income derived from active work or business activities is considered.
Income that counts towards the earnings limit primarily includes wages from employment and net earnings from self-employment. This encompasses salaries, hourly wages, tips, commissions, bonuses, and even vacation or severance pay if they are considered part of gross wages. For self-employed individuals, it is the net profit from their business activities that is counted.
Many types of income do not count against the Social Security earnings limit, as they are generally categorized as unearned income. Examples of excluded income sources include pensions, annuities, and investment income such as dividends, interest, and capital gains. Government or military retirement benefits, inheritances, and gifts also do not count. Social Security benefits themselves are not considered earned income for the purpose of these limits.
Reporting Earnings to Social Security
Accurately reporting earnings to the Social Security Administration is an important responsibility for beneficiaries who are working. This ensures that benefits are calculated correctly and helps avoid overpayments or underpayments.
Individuals should proactively report their estimated annual earnings to the SSA, especially if they anticipate their income will exceed the applicable earnings limits. Timely reporting helps the SSA adjust benefit payments as needed, which can prevent the accumulation of significant overpayments that would later need to be repaid.
There are several convenient methods available for reporting earnings to the SSA. Beneficiaries can report online through their personal “my Social Security” account, by phone, or by mail. Visiting a local Social Security office in person is another option for reporting income changes.
After the tax year concludes, the SSA reviews actual earnings based on information from employers (W-2s) and tax returns. This annual review allows the agency to reconcile estimated earnings with actual income and make any necessary adjustments to benefits. Keeping detailed records, such as pay stubs and bank statements, is advisable to verify earnings if needed during this reconciliation process.