If You Retire at 65 How Much Can You Earn?

Social Security benefits provide income for many individuals in retirement. Many people consider continuing to work as they approach or enter retirement. A common question is how earning income might affect these benefits, particularly for those around age 65. Understanding this relationship is important for retirement planning.

Social Security Earnings Limit for Early Claimants

Individuals receiving Social Security retirement benefits before their Full Retirement Age (FRA) are subject to annual earnings limits. The Social Security Administration (SSA) sets an annual earnings limit of $23,400 in 2025 for those under their FRA for the entire year. If earnings exceed this amount, benefits are temporarily reduced. This limit applies to wages from employment or net earnings from self-employment.

A different, higher earnings limit applies in the calendar year an individual reaches their Full Retirement Age. For 2025, this limit is $62,160. This higher limit applies only to earnings in the months before the individual’s birth month. Once the birth month arrives, this specific limit no longer applies, and the earnings test changes significantly. These annual limits are adjusted periodically to account for changes in average wages.

Calculating Benefit Reductions

If an individual’s earnings surpass the applicable limit before reaching Full Retirement Age, Social Security benefits are reduced. For those under Full Retirement Age for the entire year, the reduction rate is $1 in benefits for every $2 earned over the annual limit. For instance, if someone earns $25,400 in 2025, exceeding the $23,400 limit by $2,000, their annual benefits would be reduced by $1,000.

In the year an individual reaches Full Retirement Age, a different reduction rate applies to earnings before their birth month. During this period, $1 in benefits is deducted for every $3 earned above the higher annual limit of $62,160. For example, if an individual reaches FRA in August 2025 and earns $63,000 before August, exceeding the limit by $840, their benefits would be reduced by $280. These withholdings are temporary, not a permanent loss of benefits.

Income Subject to the Earnings Limit

The Social Security earnings limit specifically applies to certain types of income. Earnings that count towards this limit include wages received from an employer and net earnings derived from self-employment. Commissions, bonuses, and vacation pay are also included in this category.

Conversely, many other types of income do not count towards the Social Security earnings limit. These non-countable income sources include pensions, annuities, and investment income such as interest, dividends, and capital gains. Distributions from retirement accounts like IRAs or 401(k)s, as well as government or military retirement benefits, are also excluded from the earnings test.

Earning Rules at Full Retirement Age

Full Retirement Age (FRA) is the specific age at which an individual can receive their full, unreduced Social Security benefits. This age varies based on the individual’s birth year. For those born in 1960 or later, FRA is age 67. Individuals born between 1943 and 1959 have an FRA that ranges from 66 to 66 and 10 months.

Once an individual reaches their Full Retirement Age, the Social Security earnings limit completely disappears. Beneficiaries can earn any amount of income from work without their Social Security benefits being reduced.

Any benefits withheld due to the earnings limit before reaching FRA are not permanently lost. The Social Security Administration recalculates the individual’s monthly benefit amount at Full Retirement Age. This recalculation, known as the “adjustment of the reduction factor,” increases the monthly benefit to account for the months benefits were previously withheld because of excess earnings.