Navigating retirement finances, especially the interplay between working and Social Security benefits, can be complex. For those asking, "How much money can you make at 65 and still draw Social Security?" the answer involves understanding the annual earnings limit set by the Social Security Administration (SSA).
The Social Security Earnings Limit at Age 65
At age 65, your Social Security status depends on whether you have reached your Full Retirement Age (FRA). For most people born between 1943 and 1954, FRA is 66. For those born later, it gradually increases. If you are 65 and have not yet reached your FRA, you are subject to the Social Security earnings limit.
How the Earnings Limit Works
For years prior to reaching your FRA, the SSA has an annual earnings limit. In 2025, for example, this limit is \$22,320. If your earnings exceed this amount, your Social Security benefits will be reduced. For every \$2 you earn over the limit, \$1 is withheld from your benefits.
Example: If the limit is \$22,320 and you earn \$24,320, you've earned \$2,000 over the limit. The SSA would withhold \$1,000 from your benefits (\$2,000 / 2).
It's important to note that only earned income (wages or net earnings from self-employment) counts toward this limit. Income from pensions, annuities, investment earnings, and capital gains does not affect your Social Security benefits.
Reaching Your Full Retirement Age (FRA)
In the year you reach your Full Retirement Age (FRA), a different earnings limit applies. This limit is significantly higher than the one for years prior to FRA. In 2025, this limit is \$59,520 (for the months before you reach FRA). For every \$3 you earn above this higher limit, \$1 is withheld from your benefits.
Once you reach your FRA, the earnings limit disappears entirely. You can earn any amount of money without your Social Security benefits being reduced.
Withheld Benefits Are Not Lost Forever
If some of your Social Security benefits are withheld due to the earnings limit, those benefits are not gone permanently. When you reach your Full Retirement Age, your monthly benefit amount will be recalculated to account for the withheld benefits, effectively increasing your future payments. This is done by giving you credit for the months in which benefits were withheld.
Strategies for Working While Drawing Social Security
Many individuals choose to work past age 65 for various reasons, whether for financial necessity or personal fulfillment. Here are some strategies:
- Monitor Your Earnings: Keep a close eye on your income throughout the year to avoid exceeding the earnings limit if you are not yet at FRA. Adjust your work hours or negotiate compensation structures (e.g., bonus timing) if needed.
- Delay Social Security: If you can comfortably work and cover your expenses without Social Security, delaying your claim past age 65 and even past your FRA can significantly increase your future monthly benefit. For each year you delay past your FRA, up to age 70, your benefits increase by a certain percentage (currently 8% per year).
- Understand Different Income Types: Remember that only earned income affects the limit. If you have significant investment income or a pension, these do not count against the Social Security earnings test.
- Consider Part-Time Work: Engaging in part-time work or consulting gigs can be a way to supplement your income without hitting the earnings limit too quickly.
Comparison of Earnings Limits and Benefit Reductions
Let's compare the rules for different age groups relative to Full Retirement Age (FRA).
| Situation | Earnings Limit (2025 Example) | Benefit Reduction Formula | What Counts? |
|---|---|---|---|
| Prior to Year of FRA | \$22,320 | \$1 for every \$2 earned | Wages, net self-employment income |
| Year You Reach FRA (before FRA month) | \$59,520 | \$1 for every \$3 earned | Wages, net self-employment income |
| Once You Reach FRA | No Limit | No Reduction | N/A |
This table illustrates the different financial considerations depending on your age relative to your Full Retirement Age.
Impact of Taxes on Social Security Benefits
It's also important to remember that your Social Security benefits themselves can be subject to federal income tax if your combined income exceeds certain thresholds. Combined income is defined as your adjusted gross income (AGI) plus non-taxable interest plus one-half of your Social Security benefits.
- Single Filer: If your combined income is between \$25,000 and \$34,000, up to 50% of your benefits may be taxable. Above \$34,000, up to 85% may be taxable.
- Married Filing Jointly: If your combined income is between \$32,000 and \$44,000, up to 50% of your benefits may be taxable. Above \$44,000, up to 85% may be taxable.
Some states also tax Social Security benefits, so it's wise to check your local tax laws.
Conclusion
Understanding how much money you can make at 65 and still draw Social Security is essential for effective retirement planning. If you are 65 and have not yet reached your Full Retirement Age, an annual earnings limit applies, leading to temporary benefit reductions if exceeded. Once you reach your Full Retirement Age, there is no earnings limit, allowing you to work as much as you desire without affecting your Social Security payments. By strategically managing your earned income and understanding the rules, you can optimize your retirement benefits and financial well-being. For more detailed and current information, it is always recommended to consult the official Social Security Administration website or a qualified financial advisor.
For more specific details on the earnings limits and your benefits, visit the Social Security Administration's website.
