Understanding the Social Security Earnings Test
If you choose to work while receiving Social Security retirement benefits, your earnings may be subject to a test that can temporarily reduce your payments. The Social Security Administration (SSA) applies different rules based on whether you are below your full retirement age (FRA), reaching your FRA during the year, or have already surpassed it. It is important to note that any benefits that are withheld are not lost forever; your monthly benefit will be recalculated and increased once you reach FRA to account for the withheld payments.
Earnings Limits for 2025
For 2025, the earnings limits are set at two different levels to account for different life stages of retirees. These limits are adjusted annually to keep pace with the national average wage index.
If you are below full retirement age for all of 2025
For individuals who will be younger than their full retirement age for the entire year, the annual earnings limit is $23,400. The SSA will withhold $1 in benefits for every $2 you earn above this limit. This applies to all wages and net self-employment earnings throughout the year.
For example, if you earn $25,000 in 2025, you are $1,600 over the limit. The SSA will deduct half of that amount, or $800, from your total annual benefits. This reduction is applied throughout the year by reducing monthly payments.
If you reach full retirement age in 2025
For those who reach their FRA during 2025, a higher earnings limit applies. The limit is $62,160, but this only applies to earnings made in the months before the month you reach your FRA. For every $3 you earn above this limit, $1 will be withheld from your benefits.
Once you reach your FRA, the earnings limit no longer applies, and you can earn as much as you want without having your Social Security benefits reduced. This is a key transition point in retirement planning.
After reaching full retirement age
Beginning with the month you reach your FRA, there is no limit on how much you can earn. Your earnings will not affect your Social Security benefits at all. This rule encourages continued work and earning potential for those who have reached their FRA.
Comparison of 2025 Earnings Limits
| Age Group | 2025 Earnings Limit | Reduction Rule | Applicability |
|---|---|---|---|
| Under FRA all year | $23,400 | $1 withheld for every $2 earned over the limit. | All earnings for the entire year. |
| Reach FRA during 2025 | $62,160 | $1 withheld for every $3 earned over the limit. | Earnings only in months before reaching FRA. |
| Full Retirement Age and older | No limit | No reduction in benefits. | All earnings. |
What income counts toward the limit?
It is important to know which types of income are included in the Social Security earnings test. Only income from a job or self-employment affects your benefits.
- Wages and salaries: Income from working for an employer. For this purpose, income is counted when it is earned, not when it is paid.
- Net earnings from self-employment: This is your profit after deducting business expenses. For those who are self-employed, the SSA also uses a monthly retirement test based on hours worked to determine retirement status in the first year of retirement.
What income does NOT count?
Many types of income do not affect your Social Security benefits, providing financial flexibility.
- Pensions and annuities
- Investment income
- Interest earnings
- Veterans benefits
- Other government benefits
The special monthly rule
If you retire mid-year and have already earned more than the annual limit, a special monthly earnings test may apply during your first year of retirement. Under this rule, the SSA can consider you retired for any month your earnings are below a certain monthly threshold, regardless of your total annual earnings. In 2025, for those under FRA, this monthly threshold is $1,950. This allows you to receive full benefits for the months you are considered retired. This rule only applies in the first year you start collecting benefits and continue to work.
Conclusion
Navigating the Social Security earnings limits in 2025 requires understanding your age, your earnings, and the specific rules that apply to your situation. While working before reaching your full retirement age can temporarily reduce your benefits, any withheld amounts are returned to you in the form of higher monthly payments once you reach your FRA. The Social Security Administration's website offers resources and calculators to help you plan accordingly. Understanding these rules is crucial for anyone considering working while collecting benefits to ensure financial confidence in your senior years.
For more detailed information and official resources on this topic, visit the Social Security Administration's Benefits Planner: Retirement page.
