Understanding the Social Security Earnings Test in 2025
For retirees who continue to work, the Social Security Administration's (SSA) earnings test determines if your benefits will be reduced. These limits are adjusted annually for inflation, so it is important to know the updated 2025 figures. Benefits lost due to exceeding the limit are not gone forever; they are credited back to you in the form of a higher monthly benefit once you reach your full retirement age (FRA).
The Earnings Limit for those Under Full Retirement Age
If you are below your Full Retirement Age (FRA) for the entire year in 2025, there is a specific limit on how much you can earn before your benefits are affected. The threshold for 2025 is $23,400.
- The Rule: For every $2 you earn over the $23,400 limit, the SSA will withhold $1 from your Social Security benefits.
- Example: If you earn $25,400 in 2025, you are $2,000 over the limit. The SSA will withhold $1,000 from your total benefits for the year ($2,000 / 2).
The Earnings Limit for the Year You Reach Full Retirement Age
A different, more lenient set of rules applies during the year you will reach your FRA. In 2025, this higher earnings limit is $62,160, but only applies to earnings in the months leading up to your birthday month.
- The Rule: The SSA will withhold $1 for every $3 you earn above the $62,160 limit. Importantly, this calculation only includes income earned before the month you reach your FRA. There is no earnings limit for your FRA month and onward.
- Example: If you reach FRA in August 2025, and you earn $69,000 between January and July, your excess earnings are $6,840 ($69,000 - $62,160). The SSA would withhold $2,280 in benefits ($6,840 / 3) for the months leading up to August. After August, you can earn any amount with no further withholding.
What Counts as Earnings?
The Social Security earnings test only considers earned income, which comes from wages from a job or net earnings from self-employment. It is crucial to know what types of income are not counted:
- Investment income (e.g., dividends, interest)
- Pension income
- Annuities
- Government benefits (e.g., veterans benefits)
Special Monthly Earnings Test
For those who retire mid-year, the annual earnings test can sometimes be unfair. For your first year of retirement only, the SSA offers a monthly earnings test that can prevent or reduce benefit withholding.
- How it Works: The SSA considers you retired for any month your earnings fall below the monthly limit, regardless of how much you earned earlier in the year.
- 2025 Monthly Limits: If you are under FRA all year, the monthly limit is $1,950. If you reach FRA in 2025, the monthly limit is $5,180 (for the months before FRA).
- Scenario: A person retires at age 62 in October 2025, having already earned $45,000. If they earn less than $1,950 per month in November and December, they can receive their full benefits for those two months, even though their yearly income exceeds the annual limit.
2025 Social Security Earnings Test Comparison
| Situation | 2025 Earnings Limit | Withholding Rate | Special Monthly Rule | What Happens to Withheld Benefits? |
|---|---|---|---|---|
| Under FRA all year | $23,400 | $1 for every $2 earned over limit | Available in the first year of retirement, limit is $1,950/month | Added to your monthly benefit after reaching FRA |
| Reaching FRA in 2025 | $62,160 (for months before FRA) | $1 for every $3 earned over limit | Available for the first year of retirement, limit is $5,180/month | Added to your monthly benefit after reaching FRA |
| At or After FRA | No limit | N/A | N/A | N/A |
Planning and Reporting Your Income
To prevent benefit withholding, consider managing your earned income to stay within the appropriate annual or monthly limits for your situation. It's important to report your estimated annual earnings to the SSA so they can withhold the correct amount from your payments. If your actual earnings are different than what you reported, the SSA will reconcile the difference later. Timely and accurate reporting helps prevent overpayment, which the SSA will require you to pay back. You can access official information directly from the Social Security Administration on their page, “How Work Affects Your Benefits”.
Conclusion: Navigate Your Retirement with Confidence
Successfully managing your Social Security benefits while working is a crucial part of a healthy financial retirement. By understanding the specific how much can you earn in 2025 and draw Social Security limits—$23,400 for those under FRA and $62,160 for the year you reach FRA—you can plan your work income strategically. Remember that benefits are not truly lost, but postponed and re-added to your payment later, allowing you to have flexibility. Whether you opt to stay under the limits or earn more, being informed is the best way to ensure your benefits align with your retirement goals.
