Understanding the Social Security Earnings Test
Working while receiving Social Security retirement benefits can be a great way to supplement your income, but it's crucial to understand the Social Security Earnings Test. This test, administered by the Social Security Administration (SSA), determines if your benefits will be temporarily reduced based on how much you earn from work. The rules vary depending on your age and whether you have reached your full retirement age (FRA).
Your FRA is determined by your birth year and is the age at which you can receive your full, unreduced retirement benefit. For anyone born in 1960 or later, the FRA is 67. If you begin receiving benefits before this age, your earnings are subject to the test.
Earnings Limits for 2025
For the calendar year 2025, there are two primary earnings limits to be aware of, based on your age relative to your full retirement age. These figures are important for anyone planning to work while collecting benefits early.
If you are under full retirement age for the entire year:
- The earnings limit is $23,400.
- For every $2 you earn over this limit, the SSA will withhold $1 from your benefits.
If you reach full retirement age during 2025:
- A different earnings limit applies for the months before you reach your FRA. In 2025, this limit is $62,160.
- For every $3 you earn over this limit, the SSA will withhold $1 from your benefits.
- Once you reach your full retirement age month, the earnings limit disappears completely for the rest of the year and all subsequent years. Your earnings will no longer affect your benefits, no matter how much you make.
What Counts as Earnings?
Not all income is considered in the Social Security Earnings Test. The SSA only counts earned income from a job or self-employment towards the limit. This includes wages, bonuses, and commissions. Income from sources like the following is generally not counted:
- Pensions and annuities
- Investment income
- Interest income
- Capital gains
- Distributions from retirement accounts (e.g., 401(k) or IRA withdrawals)
- Government or military retirement benefits
The First-Year Special Rule
The SSA has a special rule for people who retire mid-year. If you retire in the middle of 2025 and have already earned more than the annual limit, this rule can help. For any whole month that the SSA considers you retired, you can receive a full Social Security check, regardless of your yearly earnings.
For 2025, this monthly limit is:
- $1,950 per month if you are under FRA all year.
- $5,180 per month if you reach FRA during the year (for the months before you reach FRA).
How Withheld Benefits are Repaid
It's important to remember that benefits temporarily withheld due to the earnings test are not lost forever. When you reach your full retirement age, the SSA will recalculate your monthly benefit amount to account for the benefits that were withheld. This results in a higher monthly payment for the rest of your life. The adjustment essentially credits you for the months you lost, acting as if you filed for benefits later than you actually did. This process can significantly increase your long-term benefit amount.
Working and Full Retirement Age
As mentioned, once you reach your full retirement age, the earnings limit no longer applies. You can earn any amount from work without it affecting your monthly Social Security check. This is a key incentive for some retirees to postpone claiming benefits and continue working, allowing their monthly benefit to grow due to delayed retirement credits. For more information, you can visit the official Social Security Administration website at SSA.gov.
A Comparison of Earnings Limit Scenarios (2025)
| Scenario | Age | Earnings Limit | Benefit Withholding | Key Takeaway |
|---|---|---|---|---|
| Under FRA All Year | 62–66 | $23,400 annually | $1 for every $2 earned over limit | Benefits reduced significantly if earnings are high. |
| Reach FRA in 2025 | Will turn 67 in 2025 | $62,160 (for months before FRA) | $1 for every $3 earned over limit | Limit is higher and less punitive, ends at FRA. |
| At or Above FRA | 67+ | No limit | No withholding | You can earn unlimited income without affecting benefits. |
| First Year Special Rule | Under FRA | $1,950 per month (Under FRA all year) or $5,180 per month (Reach FRA in 2025) | Only applies if monthly earnings exceed limit | Designed for those who stop working mid-year to receive benefits sooner. |
Conclusion
Navigating the rules for working while collecting retirement benefits is a critical part of a successful financial plan. While the earnings test may seem daunting, understanding the tiered system and the fact that withheld benefits are not permanently lost can alleviate many concerns. The most important factor is your age in relation to your full retirement age. By planning your work schedule and knowing the annual limits, you can continue to supplement your income without negatively impacting your financial security in the long run. If you are approaching retirement or already receiving benefits, staying informed about these rules, which are subject to annual adjustments, is essential for maximizing your financial well-being.
