Understanding the Social Security Earnings Limit at 64
Starting retirement benefits at age 64 means you are claiming benefits before your Full Retirement Age (FRA). For anyone born in 1960 or later, your FRA is 67. The Social Security Administration (SSA) has specific rules for beneficiaries who continue to work before reaching this age.
In a year that you are under your FRA for the entire year, your Social Security benefits will be temporarily reduced if your earnings exceed the annual limit. For 2025, that limit is $23,400. For every $2 you earn over this limit, $1 will be deducted from your benefits.
This is not a permanent loss of benefits. The SSA keeps track of the benefits it withholds. When you reach your FRA, your monthly benefit will be recalculated to give you credit for the months in which your benefits were reduced or withheld due to excess earnings. This results in a higher monthly payment for the rest of your life.
The Year You Reach Full Retirement Age
Special rules apply in the calendar year you reach your FRA. In 2025, the earnings limit for the months before you reach your FRA is $62,160. For every $3 you earn above this higher limit, $1 will be deducted from your benefits. Importantly, this reduction only applies to earnings in the months leading up to your birthday month.
Beginning in the month you turn 67, the earnings test disappears. You can earn any amount you want for the rest of the year and for every year after without it affecting your Social Security benefits.
How Working Can Boost Your Future Benefits
Continuing to work, even part-time, can have a positive impact on your lifetime Social Security benefits. The SSA calculates your benefit amount based on your average indexed monthly earnings during the 35 years you earned the most. If your work at age 64 replaces a year of lower earnings (or a year with no earnings) in your 35-year history, your overall benefit calculation could increase. The SSA automatically reviews your earnings record each year and recalculates your benefit if a higher-earning year is found. You don't need to do anything to get this increase; it happens automatically.
Financial and Health Benefits of Phased Retirement
Deciding to work part-time at 64 can be a strategic move for your financial, mental, and physical well-being. This phased retirement approach offers numerous benefits that a complete cessation of work does not.
Financial Resilience
- Delaying Withdrawals: Earning extra income can reduce your reliance on withdrawals from retirement savings, such as your 401(k) or IRA. This allows your investments to continue growing through compounding, extending their longevity.
- Bridging Income Gaps: If you're not yet ready to take on the full expense of retirement from savings alone, part-time work can bridge the gap, providing supplemental income to cover living expenses or fund hobbies.
Health and Well-being
- Mental and Social Engagement: Work provides routine, social interaction, and intellectual stimulation. This can help combat the feelings of isolation or boredom that some new retirees experience.
- Flexibility and Purpose: A part-time schedule allows for a better work-life balance, giving you more time for travel, family, and hobbies while still maintaining a sense of purpose and connection to the professional world.
Comparison: Working vs. Full Stop Retirement
| Feature | Working at 64 (Pre-FRA) | Full Retirement (No Work) |
|---|---|---|
| Social Security Benefits | Potentially reduced temporarily by earnings test; increased benefit later | No earnings test to worry about |
| Income Sources | Wages + Social Security | Primarily Social Security + Savings |
| Financial Security | More robust; less reliance on savings | Dependent entirely on savings/benefits |
| Taxes | Higher combined income potentially taxes benefits | Benefits potentially less taxed |
| Purpose & Engagement | Maintains social connections, structure | Requires finding new purpose, hobbies |
Important Tax and Medicare Considerations
It's important to consider how additional earned income will affect your taxes and, if applicable, your Medicare premiums. While working can boost your total income, it can also lead to higher tax obligations.
Your combined income, which includes your adjusted gross income, nontaxable interest, and half of your Social Security benefits, determines if your benefits are taxable. If this combined income exceeds certain thresholds ($25,000 for single filers in 2025, $32,000 for joint filers), a portion of your Social Security benefits may be taxed at the federal level. Earning additional income could push you into a higher tax bracket and increase the amount of your benefits that are subject to tax.
Furthermore, if you are over 65 and enrolled in Medicare, a higher income can increase your Part B and Part D premiums. This is known as the Income-Related Monthly Adjustment Amount (IRMAA) and applies to individuals with income above certain levels.
Making the Right Decision for You
Deciding to work at 64 while receiving Social Security is a complex decision with significant financial and personal implications. Weigh the financial benefits of supplemental income and a higher future Social Security payment against the temporary reduction in benefits and potentially higher taxes.
Consider your personal motivations as well. A phased retirement can offer a more gradual transition, maintaining mental and social engagement. Working allows you to delay tapping into your savings, providing a greater financial buffer. Discuss your specific situation with a financial advisor and tax professional to understand the full impact on your finances.
Ultimately, the choice depends on your financial needs, health, and personal goals for retirement. Carefully consider all factors to ensure you make the best decision for your future.
Learn more about the specific Social Security earnings limits by visiting the official Social Security Administration website.
