How Much Money Can You Earn If You’re on Social Security?

Social Security benefits serve as a foundational financial support for millions of individuals across the United States. These benefits are designed to replace a portion of income for those in retirement, facing disability, or for survivors of beneficiaries. Many individuals receiving Social Security benefits also work to supplement their income. Understanding the rules surrounding earning income while receiving these benefits is important for financial planning. This article explains the guidelines on how earned income can affect Social Security benefits.

Social Security Earnings Limits

Social Security earnings limits specify how much income a beneficiary can earn from work before their benefits may be reduced. These limits apply only if the beneficiary is under their Full Retirement Age (FRA). For 2025, two primary earnings limits apply depending on the beneficiary’s age relative to their FRA.

For beneficiaries who will be under their Full Retirement Age for the entire year, the annual earnings limit is $23,400. If a beneficiary reaches their Full Retirement Age within the current year, a higher earnings limit applies for the months prior to reaching FRA. In 2025, this limit is $62,160. Once the month of Full Retirement Age is reached, the earnings limits no longer apply.

Income counting toward these limits is “earned income,” which primarily includes wages from employment or net earnings from self-employment. Income sources that do not count towards these limits include pensions, annuities, investment income, interest, dividends, capital gains, and government benefits. These earnings limits are subject to annual adjustments based on changes in the national average wage index.

Impact of Earnings on Benefits

Exceeding the Social Security earnings limits can lead to a reduction in monthly benefits. The rate at which benefits are withheld depends on whether the beneficiary is under Full Retirement Age for the entire year or will reach it during the current year. The Social Security Administration (SSA) applies specific deduction rates to account for earnings above the set limits.

For beneficiaries who are under their Full Retirement Age for the entire year, $1 in benefits is withheld for every $2 earned above the annual limit. If a beneficiary reaches Full Retirement Age in the current year, $1 in benefits is withheld for every $3 earned above the higher annual limit, but only for earnings in months prior to reaching FRA. For example, if someone under FRA earns $25,000 in 2025, which is $1,600 over the $23,400 limit, their benefits would be reduced by $800 ($1,600 divided by 2).

The Social Security Administration typically withholds benefits by reducing monthly payments until the excess earnings are accounted for. It is important to note that benefits are not permanently lost when they are withheld due to excess earnings. Instead, the SSA recalculates the benefit amount once the beneficiary reaches Full Retirement Age, potentially leading to higher future monthly payments to make up for the earlier withholdings. This adjustment to the benefit ensures that the value of the withheld funds is returned over time.

Reaching Full Retirement Age

Full Retirement Age (FRA) is a specific age at which individuals become eligible to receive 100% of their Social Security retirement benefits. This age is determined by the individual’s birth year and has gradually increased over time. For individuals born in 1960 or later, the Full Retirement Age is 67.

The Full Retirement Age varies depending on the birth year:
1937 or earlier: 65
1938: 65 and 2 months
1939: 65 and 4 months
1940: 65 and 6 months
1941: 65 and 8 months
1942: 65 and 10 months
1943-1954: 66
1955: 66 and 2 months
1956: 66 and 4 months
1957: 66 and 6 months
1958: 66 and 8 months
1959: 66 and 10 months
1960 and later: 67

Once a beneficiary reaches their Full Retirement Age, the Social Security earnings limits no longer apply. This means individuals can earn any amount of income from work without their Social Security benefits being reduced or withheld. For the year a beneficiary reaches FRA, the higher earnings limit applies only to the months before their birthday, and no limit applies from the month they reach FRA onward.

Reporting Your Earnings

Accurately and timely reporting earnings to the Social Security Administration (SSA) is important for all beneficiaries. This helps prevent overpayments or underpayments of benefits. Beneficiaries should provide an estimate of their expected earnings for the year when they first start working or apply for benefits.

If earnings change significantly during the year, update the SSA promptly. After the end of the year, beneficiaries should provide final earnings information, typically through their W-2 or tax return. This ensures the SSA has the most accurate data to adjust benefits if necessary.

Beneficiaries can report earnings through various methods, including online services, by phone, or in person at a local Social Security office. Failing to report earnings accurately or on time can lead to consequences, such as suspension of benefits or the requirement to repay overpayments. For instance, a first violation of not reporting accurately could result in benefits being withheld for up to six months. Maintaining detailed records of income and work activity is a prudent practice for all beneficiaries.