How Much Money Can You Earn and Still Collect Social Security?

Many individuals work while receiving Social Security benefits. Specific rules determine how much can be earned before benefits are affected, balancing retirement benefits with continued employment. Understanding these guidelines is important for individuals planning their finances.

How Earnings Affect Benefits Before Full Retirement Age

If an individual is receiving Social Security benefits and has not yet reached their full retirement age (FRA), their earnings may lead to a reduction in their benefits. FRA varies by birth year, generally between ages 66 and 67. For instance, individuals born in 1960 or later have an FRA of 67.

For 2025, if you are under your FRA for the entire year, the annual earnings limit is $23,400. For every $2 earned over this limit, $1 in Social Security benefits will be withheld. For example, if someone earns $25,400 in 2025, which is $2,000 over the limit, their benefits would be reduced by $1,000.

This reduction applies to earnings until the month the individual reaches their FRA. A special monthly earnings test can apply in the first year of retirement. This rule allows for full benefits in any month the individual is considered retired, provided monthly earnings are below $1,950 in 2025.

Earnings Limits in the Year You Reach Full Retirement Age

Distinct rules apply in the specific calendar year an individual reaches their full retirement age. A higher earnings limit of $62,160 applies in 2025. The benefit reduction rule also changes for this particular year: for every $3 earned over this limit, $1 in benefits will be withheld.

This higher limit applies only to earnings before the month the individual reaches their full retirement age. For instance, if someone reaches their FRA in August 2025, only earnings from January through July are counted against this limit. Once the individual reaches their full retirement age month, earnings limits no longer apply for that month or any subsequent month.

Income That Counts Toward the Limits

Understanding what types of income are considered “earnings” by Social Security for the purpose of the earnings test is important. Generally, only wages from employment and net earnings from self-employment count toward these limits. This includes gross wages received before any deductions for taxes, insurance, or other withholdings. Bonuses, commissions, and even vacation pay are also included.

Conversely, several types of income do not count towards these earnings limits. These include pensions, annuities, and investment income, such as interest, dividends, and capital gains. Other forms of income not considered are military retirement pay, other government retirement benefits, and rental income, unless it stems from active self-employment. This distinction helps individuals manage their diverse income streams without affecting their Social Security benefits.

What Happens When You Reach Full Retirement Age

Once an individual attains their full retirement age (FRA), the Social Security earnings limits no longer apply. This means that individuals can earn any amount of money from work without their Social Security benefits being reduced. This removal of the earnings test provides complete flexibility for continued employment.

Social Security implements an “Adjustment of the Reduction Factor” (ARF) or benefit recalculation process. This process reviews the individual’s work record and any benefits that were withheld due to the earnings test. For every month that benefits were withheld because earnings exceeded the limit, the individual’s future monthly benefit amount is recalculated and slightly increased. This adjustment gives individuals credit for the benefits they did not receive earlier, leading to a higher monthly payment for the remainder of their lives. The adjustments are generally made retroactively to the month the individual attained FRA, though the actual processing can take some time.