Will My Social Security Increase if I Keep Working?

Social Security benefits provide income for many individuals in retirement, with amounts determined by an individual’s earnings history. Continued employment can influence the amount of Social Security benefits received. This article clarifies how working while receiving Social Security benefits can impact monthly payments, including potential increases.

Working Before Full Retirement Age

If you are working and receiving Social Security benefits before reaching your full retirement age (FRA), your earnings may affect the amount of benefits you receive. This is due to a provision known as the earnings test. Full Retirement Age varies based on your birth year, typically ranging from 66 to 67 years old. The earnings test only applies if you are under your FRA for the entire year or for the months leading up to your FRA.

For individuals who are under their full retirement age for the entire year, a specific annual earnings limit applies. In 2025, this limit is $23,400. If your earnings exceed this threshold, the Social Security Administration (SSA) will withhold $1 in benefits for every $2 you earn above the limit. For example, if you earn $25,000 in 2025 and are under FRA all year, your earnings are $1,600 over the limit, resulting in a $800 reduction in your annual benefits.

A different, more generous earnings limit applies in the year you reach your full retirement age. For 2025, this higher limit is $62,160. In this specific year, the SSA will deduct $1 in benefits for every $3 you earn above this limit, but only counting earnings made in the months prior to your FRA. Once you reach your full retirement age, the earnings test no longer applies, and you can earn any amount without your Social Security benefits being reduced.

Benefits withheld due to the earnings test are not permanently lost. The SSA keeps a record of these amounts. Once you reach your full retirement age, your monthly benefit amount is recalculated and permanently increased to account for the benefits previously withheld. This adjustment ensures you eventually receive the value of those benefits over your remaining lifespan.

How Earnings Can Increase Payments

Continued work, even after you begin receiving Social Security benefits, can lead to an increase in your monthly payment. This increase occurs through an annual recalculation process performed by the Social Security Administration. The mechanism for this increase relates to how your benefit amount is initially determined: it is based on your average indexed monthly earnings (AIME) over your 35 highest-earning years.

When you continue to work, your current earnings are added to your Social Security earnings record. Each year, the SSA reviews this record. If your earnings for a recent year are higher than one of the 35 years previously used in your AIME calculation, the new, higher earning year replaces a lower-earning year. This replacement effectively raises your overall average indexed monthly earnings.

This process is distinct from the earnings test, which can reduce benefits if you work before your full retirement age. The earnings test is a temporary withholding mechanism, while the recalculation based on higher earnings is a permanent adjustment that can increase your benefit. This benefit increase applies whether you are before or after your full retirement age; however, if you are below FRA, any increase from higher earnings would still be subject to the earnings test reduction.

If your initial benefit calculation included years with low or no earnings, new substantial income can replace one of those lower-earning years in your 35-year average. This replacement directly boosts your AIME, resulting in a higher monthly Social Security benefit.

The Annual Benefit Recalculation

The Social Security Administration (SSA) conducts an automatic annual review of earnings records for all working beneficiaries. The SSA receives earnings information from employers via W-2 forms and from self-employed individuals through tax returns.

Upon receiving this earnings data for the prior year, the SSA determines if your recent earnings are among your 35 highest years of indexed earnings. If a recent year’s earnings surpass a year previously included in your average indexed monthly earnings (AIME) calculation, the SSA will recalculate your AIME. This recalculation uses the new, higher earning year to replace one of the lower-earning years in your benefit computation.

A successful recalculation results in a permanent increase in your monthly Social Security benefit amount. This increase is typically effective the following January. For example, if your 2024 earnings lead to a recalculation, the increase would generally be applied to your benefits starting in January 2025. Beneficiaries are usually notified by mail of any changes to their benefit amount resulting from these annual recalculations.

Reporting Your Earnings

Accurately reporting your earnings to the Social Security Administration (SSA) is crucial if you are receiving benefits and working. This is particularly relevant if you are under your full retirement age and your earnings may be subject to the earnings test. Prompt reporting helps ensure you receive the correct benefit amount and avoid potential overpayments.

You can report your earnings through several methods. These include reporting online via your “my Social Security” account, by phone, or in person at a local Social Security office. When reporting, you should provide an estimate of your expected annual earnings. If your actual earnings change significantly from your estimate, it is advisable to update the SSA promptly.

Income that counts toward Social Security’s earnings limits includes wages from employment and net earnings from self-employment, such as bonuses, commissions, and vacation pay. Other forms of income, such as pensions, annuities, investment income, and government benefits, do not count against these earnings limits. Maintain accurate records, like pay stubs and tax documents, to verify reported earnings.