Balancing Work and Social Security Retirement Benefits

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You can work while receiving Social Security retirement benefits. However, earning above certain limits before Full Retirement Age (FRA) can temporarily reduce your monthly benefits.

This guide covers the Social Security Administration (SSA) rules for 2025, including eligibility requirements, earnings limits, benefit calculations, income considerations, reporting requirements, and tax implications.

Social Security Retirement Eligibility

Age Requirements

You must be at least 62 years old to start receiving Social Security retirement benefits. Starting benefits before your Full Retirement Age results in a reduced amount.

Work Credits

Eligibility depends on “credits” earned while working and paying Social Security taxes:

• In 2025, you earn one credit for every $1,810 in earnings, up to four credits per year ($7,240)
• Most people need 40 credits (roughly 10 years of work) to qualify
• Credits remain on your record even with employment gaps
• Check your personal earnings record by creating or logging into your my Social Security account

Alternative Eligibility

Even without 40 credits, you might qualify through:

• Spousal benefits (current spouse)
• Former spouse benefits (if marriage lasted at least 10 years)
• Survivor benefits from a deceased spouse
• Family benefits for certain dependents (spouses 62+ or minor/disabled children)

Documentation Requirements

You’ll need to provide proof of U.S. citizenship (birth certificate or passport) or lawful work authorization if you’re not a U.S. citizen.

Remember that the 40-credit requirement is for eligibility only. Your actual benefit amount is calculated based on your average indexed monthly earnings over your highest 35 years of work.

Understanding Full Retirement Age

Your Full Retirement Age (FRA) determines when the rules about working while receiving benefits change significantly. FRA is when you become eligible for your full, unreduced Social Security retirement benefit.

While FRA was once 65 for everyone, a 1983 law gradually increased it for people born in 1938 or later due to increasing life expectancy.

Full Retirement Age by Birth Year

Note: If you were born on January 1st of any year, refer to the FRA for the previous year.

Find your specific FRA using the SSA’s Retirement Age Calculator.

Why FRA Matters for Working Retirees

Your FRA is the critical threshold for the “earnings test”:

• Before FRA: If you work while receiving benefits before reaching FRA, there’s a limit on how much you can earn each year. Exceeding this limit causes a temporary reduction in benefits.
• At and After FRA: Starting the month you reach FRA, the earnings limit disappears. You can earn any amount without affecting your Social Security payments.

While you can start benefits as early as age 62, doing so permanently reduces your monthly payment. Conversely, delaying benefits past FRA (up to age 70) increases your monthly benefit through “delayed retirement credits.” Check how benefits adjust based on starting age at the SSA’s Early or Late Retirement Effects page.

Working Before Full Retirement Age

If you start receiving Social Security retirement benefits before reaching FRA and continue working, your earnings will be subject to the annual “Retirement Earnings Test” (RET).

2025 Earnings Limit (Under FRA All Year)

For 2025, if you receive benefits and remain under your FRA for all 12 months, the annual earnings limit is $23,400. This limit typically increases yearly based on national average wage changes.

How Excess Earnings Affect Benefits ($1-for-$2 Rule)

If your earnings exceed the annual limit, the SSA temporarily withholds some benefits:

• For every $2 you earn above the $23,400 limit in 2025, $1 in benefits will be withheld

Example Calculation

Let’s say your FRA is 67, but you start benefits at 63 in 2025. Your monthly benefit is $1,000 ($12,000 annually). You work part-time earning $30,000 in 2025.

1. Calculate Excess Earnings: $30,000 (Your Earnings) – $23,400 (2025 Limit) = $6,600
2. Calculate Benefit Withholding: $6,600 ÷ 2 = $3,300
3. Calculate Benefits Received: $12,000 (Annual Benefit) – $3,300 = $8,700

The SSA might withhold full monthly checks until the $3,300 is covered rather than reducing each check slightly.

Remember this withholding is typically temporary. The SSA recalculates your benefit at FRA to give credit for months when benefits were withheld due to earnings.

Working During the Year You Reach FRA

The rules change during the specific calendar year you reach your Full Retirement Age.

2025 Earnings Limit (Year of FRA)

In 2025, if you reach FRA during the year, the earnings limit increases significantly to $62,160.

Counting Earnings Before FRA Month

This $62,160 limit only applies to earnings in the months before you reach FRA. Any money earned starting in the month you reach FRA doesn’t count toward this limit and won’t reduce benefits.

How Excess Earnings Affect Benefits ($1-for-$3 Rule)

For earnings above the limit (in months before reaching FRA), the withholding rate is more lenient:

• For every $3 you earn above the $62,160 limit, $1 in benefits will be withheld

Example Calculation

Suppose you reach FRA (66 and 10 months) in October 2025. Your monthly benefit is $1,500. You work throughout 2025, earning $70,000 for the year, with $65,000 coming from January through September.

1. Calculate Excess Pre-FRA Earnings: $65,000 – $62,160 = $2,840
2. Calculate Benefit Withholding: $2,840 ÷ 3 = $946.67
3. Benefits Received: The SSA would withhold approximately $947 from benefits payable before October. Starting in October (your FRA month), you would receive your full $1,500 monthly benefit regardless of earnings.

Working After Reaching Full Retirement Age

Once you reach FRA, the rules become much simpler:

• No Earnings Limit: Beginning the month you reach FRA, the annual earnings test no longer applies
• Keep All Benefits: You can work and earn as much as you want without any reduction in benefits

This transition provides complete freedom regarding work income without impacting your Social Security payments.

Getting Credit Back at FRA

A common concern about working before FRA is that withheld benefits are “lost.” For individuals receiving benefits based on their own work record, this generally isn’t the case. The SSA has a system to give you credit for withheld benefits once you reach FRA.

How Recalculation Works

• Automatic Recalculation: When you reach FRA, the SSA automatically recalculates your benefit amount
• Adjusting for Withheld Months: The recalculation treats months where benefits were withheld as if you had delayed starting benefits for those months
• Higher Ongoing Benefit: This adjustment results in a higher monthly benefit starting from FRA onwards, effectively paying back withheld amounts over your lifetime

Example of Recalculation

Imagine you started benefits at age 62 (with an FRA of 67), resulting in a 30% reduction from your full benefit amount. If work caused benefits to be withheld for 12 full months before reaching 67, at FRA the SSA would recalculate your benefit as if you had only started 48 months early instead of 60. This smaller reduction factor leads to a permanently higher monthly payment starting at 67.

If you earned so much that all benefits were withheld between 62 and 67, your benefit at 67 would be recalculated to your full, unreduced amount, as if you had waited until FRA to claim.

This recalculation generally applies to benefits based on your own work record. It typically doesn’t apply if benefits were withheld from spouses or survivors receiving benefits solely because they had a minor or disabled child in their care.

First Year of Retirement Special Rule

A “special monthly rule” (sometimes called the “monthly earnings test”) can apply during your first year of retirement if your earnings exceed the annual limit. This helps people who retire mid-year and may have already earned more than the limit before stopping full-time work.

Under this rule, even if your total annual earnings exceed the limit, you can still receive a full Social Security check for any month the SSA considers you “retired.”

What “Retired” Means for the Monthly Rule (2025)

• If Under FRA All Year: You’re considered retired in a month if your earnings are $1,950 or less
• If Reaching FRA During the Year: For months before your FRA month, you’re considered retired if your earnings are $5,180 or less
• Self-Employed Individuals: The SSA also looks at your work hours:
  • Not retired: If you work more than 45 hours a month
  • Retired: If you work less than 15 hours a month
  • Between 15-45 hours: Depends on whether your occupation is highly skilled or involves managing a sizable business

This special monthly rule can only be used for one year, typically your first retirement year. After that, only the annual earnings limit applies.

What Counts as “Earnings” for the Limit

It’s important to know exactly what income counts toward the annual earnings limit. The test applies only to income earned from working.

Income That COUNTS Toward the Limit

• Wages: Gross wages before deductions (taxes, insurance, 401(k) contributions)
• Net Self-Employment Earnings: Your net profit after business expenses
• Other Compensation: Bonuses, commissions, vacation pay, and possibly employee contributions to pension plans if included in gross wages

Income generally counts when earned, not when paid. A bonus earned in one year but paid the next counts for the year it was earned.

Income That DOES NOT Count Toward the Limit

The earnings test doesn’t apply to income from sources other than active work:

• Pensions and annuities
• Investment income (interest, dividends, capital gains)
• IRA distributions or 401(k) withdrawals
• Government benefits (Veterans benefits, unemployment benefits, etc.)
• Inheritances or gifts

This distinction is vital. Income from pensions, savings, or investments won’t reduce your Social Security benefits under the earnings test. Only income from ongoing employment or self-employment matters.

Can Working Increase Your Future Benefits?

While earnings can temporarily reduce benefits before FRA, working while receiving Social Security can potentially increase your benefits long-term.

How Working Can Boost Benefits

• Benefit Calculation Basis: Your Social Security retirement benefit is based on your highest 35 years of “indexed” earnings. If you have fewer than 35 years, the SSA uses zeros for missing years, lowering your average earnings and benefit amount.
• Annual Review: Each year, the SSA automatically reviews earnings records of all beneficiaries who worked.
• Replacing Lower Years: If recent earnings are higher than one of your lowest years currently included in your 35-year calculation, the SSA replaces that lower year with your new, higher-earning year.
• Benefit Increase: This substitution increases your lifetime average earnings (Average Indexed Monthly Earnings or AIME), leading to a higher monthly benefit amount. The increase is automatic and typically paid retroactively to January of the year after the earnings occurred.

This provides a positive incentive for working, especially for those with gaps in work history or periods of low earnings. Continued work can actively improve the foundation upon which benefits are calculated.

Reporting Your Earnings to Social Security

If you’re receiving Social Security retirement benefits, are under FRA, and expect your work earnings to differ from what you previously told the SSA (or expect to exceed the annual earnings limit), inform them promptly.

Why Report?

Reporting changes helps the SSA pay the correct benefit amount and prevents overpayments. If overpaid, you’ll eventually have to repay that money.

When to Report

Let the SSA know immediately if your earnings situation changes or if you anticipate earning more than the limit.

How to Report for Retirement Benefits

Unlike Disability (SSDI) or Supplemental Security Income (SSI) recipients, retirement beneficiaries under FRA currently cannot report earnings changes online. You must contact the SSA by:

• Phone: Call 1-800-772-1213 (TTY 1-800-325-0778), Monday through Friday, 8:00 a.m. to 7:00 p.m. in most time zones
• Local Office: Find and contact your nearest office using the SSA Office Locator tool

Be prepared to provide your best earnings estimate for the year. If unsure, estimate high to avoid potential overpayments.

Tax Implications of Working While Receiving Benefits

Working while receiving Social Security creates two potential tax issues: taxes on your earnings and possible taxes on your benefits.

Taxes on Work Earnings

Just like anyone else who works, your income from a job or self-employment while receiving Social Security is subject to federal income tax and Social Security and Medicare (FICA) taxes. Receiving retirement benefits doesn’t exempt your work earnings from these standard payroll taxes.

Taxes on Your Social Security Benefits

Your Social Security benefits might also be subject to federal income tax, depending on your total income. The key is your “combined income” (also called “provisional income”).

Calculating Combined Income

Combined Income = Your Adjusted Gross Income (AGI) + Nontaxable Interest + 50% of your Social Security Benefits

• Adjusted Gross Income (AGI) includes income from wages, self-employment, pensions, investment dividends, capital gains, etc., before standard or itemized deductions
• Nontaxable Interest includes interest from sources like municipal bonds
• 50% of Social Security Benefits is half the amount reported in Box 5 of your Form SSA-1099

Income Thresholds for Benefit Taxation

Note: These income thresholds were set in 1983 and 1993 and aren’t adjusted for inflation, meaning more people may find their benefits become taxable over time due to wage and price increases.

The “Up to” percentage calculation can be complex. Generally, the taxable amount is the lesser of (a) the percentage (50% or 85%) of your benefits, or (b) the percentage of the amount your combined income exceeds the base threshold. Use the worksheets in IRS Publication 915 to determine the exact taxable amount.

Impact of Working on Benefit Taxation

Adding work income increases your AGI, which raises your combined income. This can push you over the thresholds, causing your Social Security benefits to become taxable or increasing the taxable portion. This creates a double tax effect: work income is taxed directly, and it can trigger taxes on your Social Security benefits.

Remember that in addition to federal taxes, some states also tax Social Security benefits, though rules and income thresholds vary.

Voluntary Tax Withholding from Benefits

To avoid owing a large amount at tax time or making quarterly estimated tax payments, you can request the SSA to withhold federal income tax directly from your monthly Social Security payments.

Withholding Options

You can choose to have 7%, 10%, 12%, or 22% of your monthly benefit withheld for federal taxes.

How to Request Withholding

You can request withholding by:

• Calling the SSA at 1-800-772-1213 (TTY 1-800-325-0778)
• Completing IRS Form W-4V, Voluntary Withholding Request and mailing or faxing it to your local Social Security office

Helpful Resources

SSA Calculators

• Retirement Age Calculator: Find your specific Full Retirement Age
• Retirement Earnings Test Calculator: See how earnings might affect your benefits if under FRA
• Online Benefit Calculators:
  • General Calculators Page
  • Quick Calculator
  • Online Calculator (requires earnings entry)
  • Detailed Calculator (downloadable)
• Early or Late Retirement Calculator: See the effect of starting benefits before or after FRA

Key SSA Webpages

• Working While Receiving Benefits: Primary SSA page on this topic
• Retirement Benefits Eligibility: Details on qualifying for benefits
• Full Retirement Age Information:
  • FRA Charts and Explanations
  • Full Retirement Age Data
• my Social Security Account: Access your personal statement, check earnings, get benefit estimates

SSA Publications (PDF)

• How Work Affects Your Benefits (Pub. No. 05-10069): Comprehensive guide on the earnings test
• Retirement Benefits (Pub. No. 05-10035): General overview of retirement benefits
• How You Earn Credits (Pub. No. 05-10072): Explains the work credit system
• Your Retirement Benefit: How It Is Figured (Pub. No. 05-10070): Details the benefit calculation process

IRS Resources

• Publication 915, Social Security and Equivalent Railroad Retirement Benefits: Definitive IRS guide on taxing benefits
• Form W-4V, Voluntary Withholding Request: Used to request federal tax withholding from benefits

Our articles make government information more accessible. Please consult a qualified professional for financial, legal, or health advice specific to your circumstances.