How Much Money Can You Make on Social Security?

Social Security is a social insurance program providing financial support to millions across the United States. It offers income protection in retirement, during disability, and to survivors of deceased workers. For many, Social Security benefits are a significant part of their financial planning, and understanding how earned income might affect these benefits is a common concern.

Understanding Social Security Benefits

Social Security benefits replace a portion of a worker’s lifetime earnings, with the amount received primarily determined by their earnings history. The Social Security Administration (SSA) calculates a worker’s Primary Insurance Amount (PIA), which represents the monthly benefit received if they claim at their Full Retirement Age (FRA). The PIA is the foundation for all other benefit calculations.

The calculation of the PIA begins with a person’s Average Indexed Monthly Earnings (AIME). To determine AIME, the SSA considers up to 35 of an individual’s highest-earning years. These past earnings are adjusted, or “indexed,” to account for changes in general wage levels over time. This indexing ensures earlier earnings reflect their relative value compared to more recent wages. The sum of these indexed earnings from the highest 35 years is then divided by the total number of months in those years to arrive at the AIME.

Once the AIME is established, the SSA applies a specific formula using “bend points” to calculate the PIA. For those becoming eligible in 2024, the formula applies 90% to the first portion of AIME, 32% to the next segment, and 15% to the remaining amount. These bend points are adjusted annually to reflect changes in the national average wage index. The resulting PIA is the monthly benefit amount a person would receive if they began collecting benefits exactly at their FRA.

Full Retirement Age (FRA) depends on an individual’s birth year. For those born in 1960 or later, the FRA is 67. Individuals born between 1943 and 1959 have an FRA between 66 and 67, increasing by a few months for each subsequent birth year. Claiming benefits before FRA results in a permanently reduced monthly amount. Delaying beyond FRA can lead to increased benefits through delayed retirement credits, up to age 70. For instance, claiming at age 62 with an FRA of 67 can result in a reduction of approximately 30% of the PIA.

Earning Limits and Benefit Reductions

Individuals receiving Social Security benefits while still working may have their benefits reduced if their earnings exceed certain limits. These earning limits depend on whether the beneficiary has reached their FRA. The SSA applies different rules and thresholds based on the beneficiary’s age relative to their FRA.

For those who have not yet reached their FRA, an annual earnings limit applies. In 2025, this limit is $23,400. If a beneficiary’s earnings surpass this amount, the SSA will deduct $1 in benefits for every $2 earned over the limit. For individuals who begin receiving benefits mid-year, a monthly earnings test may also apply, allowing them to earn up to $1,950 per month in 2025 without triggering a reduction for those months.

A different, higher earnings limit applies in the calendar year a person reaches their FRA. In 2025, this limit is $62,160. For earnings above this threshold, the SSA deducts $1 in benefits for every $3 earned. Only earnings accumulated in the months before the month of reaching FRA count toward this limit.

Once an individual reaches their FRA, the earnings limit no longer applies. This means beneficiaries can earn any amount of income without their Social Security benefits being reduced or withheld.

For example, consider a beneficiary under FRA in 2025 who earns $30,000. Their earnings exceed the $23,400 limit by $6,600. The SSA would then reduce their benefits by half of this excess, amounting to a $3,300 reduction. If a beneficiary reaches FRA in October 2025 and earns $70,000 by that point, with $65,000 earned before October, the excess earnings before FRA ($2,840) would result in a benefit reduction of $946.67.

Reporting Earnings and Benefit Adjustments

Individuals receiving Social Security benefits, particularly those under FRA, are required to report their earnings to the SSA. This reporting ensures that benefits are paid accurately and helps prevent overpayments or underpayments. Beneficiaries must report their total wages and/or net earnings from self-employment for each taxable year.

If there are changes in work status, such as starting or stopping a job, or changes in pay rate or hours worked, these must be reported promptly. The SSA may adjust benefits if reported earnings exceed the established limits. This adjustment typically involves withholding a portion or all of the monthly benefit payments until the excess earnings are accounted for. If an overpayment occurs, the SSA will seek to recover these funds.

Overpayment recovery policies have seen recent changes. As of late March and April 2025, the SSA has adjusted its withholding policy for overpayments, with potential recovery rates ranging from 50% to 100% of monthly benefits. Beneficiaries who face financial hardship due to these recovery efforts can contact the SSA to request a lower repayment rate or apply for a waiver if they were not at fault for the overpayment and cannot afford to repay it.

Taxation of Social Security Benefits

The amount of money an individual effectively “makes” from Social Security can also be influenced by federal income taxation of their benefits. This taxation is determined by “provisional income,” which includes adjusted gross income (AGI), tax-exempt interest, and half of the Social Security benefits received.

The portion of Social Security benefits subject to federal income tax depends on specific provisional income thresholds. For single filers in 2025, if provisional income is less than $25,000, generally none of the benefits are taxable. If provisional income is between $25,000 and $34,000, up to 50% of the benefits may be subject to tax. For provisional income exceeding $34,000, up to 85% of the benefits may be taxable.

For those filing as married filing jointly in 2025, if provisional income is less than $32,000, no benefits are taxable. If provisional income falls between $32,000 and $44,000, up to 50% of the benefits may be taxed. Should provisional income exceed $44,000, up to 85% of the Social Security benefits may be subject to federal income tax.

These thresholds are set by federal law and are not adjusted for inflation. This means more beneficiaries may find a portion of their benefits becoming taxable over time as other income sources increase. Some states also impose income taxes on Social Security benefits. Individuals can elect to have federal income taxes withheld from their monthly Social Security payments by submitting Form W-4V to the SSA.