How Much Money Can I Make and Still Draw Social Security?
Learn how continued employment impacts your Social Security benefits. Understand earning thresholds, age-based adjustments, and tax considerations for your retirement income.
Many individuals approaching retirement wonder how working affects their Social Security benefits. Understanding earnings limits and taxation rules is important for financial planning, as working while receiving benefits can introduce complexities.
Social Security Earnings Limits Before Full Retirement Age
Social Security benefits can be affected by earnings if you receive payments before your full retirement age (FRA). The Social Security Administration (SSA) sets annual earnings limits. If your income exceeds these limits, a portion of your benefits may be temporarily withheld. These limits are updated annually and vary based on whether you reach your FRA during the year.
For 2025, if you are under your full retirement age for the entire year, the annual earnings limit is $23,400. If your earnings surpass this amount, the SSA will deduct $1 from your Social Security benefits for every $2 you earn above the limit. For instance, earning $23,500 would result in a $50 benefit reduction, as $100 was earned over the limit.
A higher earnings limit applies in the year you reach your full retirement age. For 2025, this limit is $62,160. The SSA deducts $1 from your benefits for every $3 earned above this limit, but only considers earnings from January up to the month before you reach your FRA. Once you reach your full retirement age, the earnings limit no longer applies, and you can earn any amount without benefit reduction.
Only “earned income” from employment or self-employment counts towards these earnings limits. This includes wages, salaries, bonuses, commissions, and net earnings from self-employment.
Many other forms of income do not count against the earnings limits. These include pensions, annuities, investment income (interest, dividends, capital gains), and other government benefits. You can have substantial income from these sources without affecting your Social Security payments. For example, a large retirement account withdrawal or significant investment returns will not reduce benefits.
When benefits are withheld due to exceeding earnings limits, the SSA reduces your monthly payments until the full amount is withheld. For example, if $1,000 needs to be withheld, your monthly benefit might be reduced by $200 for five months. Report your estimated earnings to the Social Security Administration accurately to avoid overpayments or underpayments.
Reaching Full Retirement Age
Reaching your full retirement age (FRA) changes how earnings affect your Social Security benefits. Your FRA is the age you receive 100% of your primary Social Security benefit, and it varies by birth year. For those born between 1943 and 1954, FRA is 66. For those born in 1960 or later, it is 67. For those born between 1955 and 1959, FRA gradually increases from 66 and two months to 66 and ten months.
Upon reaching your full retirement age, earnings limits disappear. You can earn any amount from work without your Social Security benefits being reduced or withheld. This allows individuals to continue working without financial penalty from the SSA.
Any benefits previously withheld due to exceeding earnings limits before FRA are adjusted. The Social Security Administration does not “keep” withheld benefits. Once you reach your full retirement age, the SSA recalculates your benefit amount to account for months benefits were withheld.
This recalculation increases your monthly benefit amount going forward, as if you had claimed benefits later. For example, if benefits were withheld for 12 months before your FRA, your future monthly payments will be adjusted upwards. This adjustment is not a lump-sum payment but a permanent increase in your ongoing monthly benefit, compensating for benefits not received earlier.
Taxation of Social Security Benefits
Beyond earnings limits, Social Security benefits can be subject to federal income tax. This applies regardless of your age. The amount of benefits subject to tax depends on your total income, known as “provisional income” or “combined income.”
To calculate provisional income, add your adjusted gross income (AGI), any tax-exempt interest income, and one-half of your Social Security benefits. This total determines if a portion of your benefits will be taxable. The Internal Revenue Service (IRS) uses specific thresholds for different filing statuses.
For single filers, if your provisional income is between $25,000 and $34,000, up to 50% of your Social Security benefits may be subject to federal income tax. If your provisional income exceeds $34,000, up to 85% of your benefits may be taxable. For married couples filing jointly, the thresholds are higher: if your provisional income is between $32,000 and $44,000, up to 50% of your benefits may be taxable. If your provisional income is above $44,000, up to 85% of your benefits may be taxable.
These federal income tax thresholds have not been adjusted for inflation, meaning more beneficiaries may find a portion of their Social Security benefits subject to tax over time. Some states also impose income tax on Social Security benefits. For tax planning, the SSA issues Form SSA-1099 each year, reporting total benefits received.