Understanding the Social Security earnings limit
If you claim Social Security benefits before your full retirement age (FRA), your earnings are subject to an annual limit. For those retiring at age 62 in 2025, your FRA will be 67. In 2025, the annual earnings limit is $23,400 if you are under your full retirement age for the entire year. This limit is updated annually based on average wage growth.
How your benefits are affected
If you earn more than the limit, the Social Security Administration (SSA) will temporarily withhold some of your benefits. The amount withheld depends on your age relative to your FRA:
- Under FRA for the entire year: The SSA withholds $1 for every $2 earned over the annual limit. This applies if you collect benefits at 62, 63, 64, or 65 in 2025.
- In the year you reach FRA: A higher limit applies ($62,160 in 2025), and $1 is withheld for every $3 earned over this limit, counting only earnings before your birthday month.
- At or after reaching FRA: There is no earnings limit, and your benefits are not reduced.
The 'first year of retirement' special rule
If you retire mid-year, a special monthly earnings limit may apply during your first year of benefits. For 2025, this is $1,950 per month. You can receive a full benefit for any month your earnings are below this limit, regardless of your total annual earnings. This special rule is only for the first year you receive benefits.
Income that counts toward the limit
Only income from wages and self-employment counts towards the earnings limit. Pensions, annuities, and investments do not. Here’s a breakdown:
Income Included in the Earnings Test
- Wages
- Net earnings from self-employment
- Bonuses
- Commissions
- Vacation pay
Income Excluded from the Earnings Test
- Pensions
- Annuities
- Investment income
- Capital gains
- Interest
- Veterans benefits
- Other government or military retirement benefits
Comparison of working at 62 vs. delaying benefits
Starting Social Security at 62 means a permanently reduced monthly benefit compared to waiting until your FRA or later. The earnings test adds another factor if you plan to work.
| Feature | Retiring and Working at 62 | Delaying Social Security until Full Retirement Age | Delaying Social Security until 70 |
|---|---|---|---|
| Benefit Start Age | Age 62 | Age 66 or 67 (depending on birth year) | Age 70 |
| Monthly Benefit | Significantly reduced permanently (approx. 30%) | 100% of your primary insurance amount | Up to an 8% increase per year after FRA |
| Earnings Limit | Applies every year until FRA ($23,400 in 2025) | No earnings limit applies | No earnings limit applies |
| Benefit Withholding | $1 withheld for every $2 earned over the annual limit | None | None |
| Recouping Withheld Benefits | Withheld benefits are credited back as a higher monthly payment after reaching FRA | Not applicable | Not applicable |
| Work's Impact on Benefit | Can increase your benefit if your new earnings replace a lower-earning year | Can increase your benefit if your new earnings replace a lower-earning year | Can increase your benefit if your new earnings replace a lower-earning year |
What happens to benefits that are withheld?
If benefits are withheld, they are not lost. Once you reach your FRA, the SSA recalculates your monthly benefit to account for the withheld payments, resulting in a higher monthly amount for the rest of your life. This process effectively reduces your early retirement claiming penalty.
How to avoid overpayments
Report your estimated earnings to the SSA and update them on any changes to avoid overpayments. If you receive more benefits than you are due, the SSA will withhold future checks to recover the amount. You can use the SSA's earnings test calculator to estimate how your earnings might affect your payments.
Conclusion
Claiming Social Security at 62 and working is possible, but the earnings limit is a key factor. In 2025, if you are under your FRA, the limit is $23,400. Exceeding this can temporarily reduce benefits, but withheld amounts are credited back as higher payments once you reach your FRA. There is no earnings limit after reaching your FRA. Carefully consider your work and retirement plans to make informed decisions.
This article provides general information. For personalized advice, consider contacting a financial advisor or a representative from the Social Security Administration.
