Working while receiving Social Security retirement benefits is increasingly common, as many retirees wish to remain active or earn extra income. However, this does affect your benefits in a couple of ways, depending on your age, earnings, and the age you retire. A step-by-step breakdown is outlined below to detail what occurs.
Collecting benefits before Full Retirement Age
If you start taking Social Security benefits before your full retirement age (FRA) and continue working, the SSA may temporarily reduce your benefits. The SSA determines the reduction amount by applying an “earnings test.”
- Annual earnings limit: In 2025, the earnings limit for people under FRA is $23,400. For every $2 you earn above that, $1 will be deducted from your benefits.
- Illustration: If you earn $40,000 in 2025, that’s $16,600 more than the limit. The SSA will deduct $8,300 from your benefits for the year.
The amount withheld isn’t lost forever. The SSA will recalculate your benefit amount at FRA to include the months that you withheld payment due to excess earnings.
Working in the year you reach Full Retirement Age
The rules are more generous in the year you attain FRA. A higher earnings limit applies-$62,160 in 2025-and only $1 is deducted for every $3 earned above that amount. Important to know: these deductions apply only to earnings before the month you reach FRA. Once you attain FRA, there are no limits on how much you can earn without affecting your benefits.
Working after Full Retirement Age
After you reach FRA (67 for people born in 1960 or later), you can work without decreasing your Social Security benefits no matter how much you earn. Working could also boost future benefits if your yearly earnings in the current year are among your highest-earning years. Social Security computes benefits based on your 35 highest-earning years.
Tax implications of working while receiving benefits
Another item that could influence the taxability of some of your Social Security benefits is income from employment:
- You’re single and have a combined income (your adjusted gross income + nontaxable interest + half of your Social Security benefits) between $25,000 and $34,000, and up to 50% can be taxed. If it’s higher than $34,000, up to 85% can be taxed.
- For couples filing together, joint incomes ranging from $32,000 to $44,000 leave a maximum of 50% subject to tax. Over $44,000, a maximum of 85% can be taxable.
Long-term gains of working with Social Security
Although earnings may decrease and be subject to taxation, working while receiving Social Security benefits offers long-term advantages:
- Better future benefits: If your benefits are postponed due to the earnings test prior to FRA, you will have higher monthly benefits after FRA as an incentive for the postponed amounts.
- Better lifetime income history: If you are currently earning more than one of the 35 years on which your benefit is calculated, it will substitute one with lower income and raise your monthly benefit.
- Keeping up financial independence: Work remains an option for retirees to earn additional income and save, if able, for future expenses.
Special considerations
- Spousal benefits: If you are taking spousal benefits or if someone else (e.g., a spouse or dependent) is taking benefits based on your work record, his or her payments could also be impacted by your earnings before FRA.
- Self-employment income: Self-employment income is subject to the same earnings limit as wages from other work.
- International work: Other provisions apply if you are abroad during the period you receive Social Security benefits.
Important takeaways
You can take Social Security and work at the same time.
Before FRA:
- Earnings over annual limits reduce present benefits but increase future benefit payments.
- The earnings limit for 2025 is $23,400.
In the year you reach FRA:
- This may create a higher cap ($62,160 in 2025), with smaller reductions.
After FRA:
- No reductions apply to the benefits based on earnings.
- Benefits can be greater in the future based on the work.
- Taxes may depend on combined income.
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This helps you decide when to take Social Security and how much to work in retirement.
